Application of multi-criteria Vector Measure Construction Method (VMCM) to assess importance of foreign direct investment (FDI) to host country's regional economy

Abstract

Foreign Direct Investment (FDI) is an important element supporting the growth of national economies. Through competitive advantage and innovation, foreign-invested enterprises can become an important agent of beneficial structural change and have a positive impact on the host economy as a whole. In general, through the provision of external capital, FDI can contribute to the economic growth of a country hosting the investment and plays a particular role in the regional economy which encompasses all activities of an economic nature pursued in a given area. The article examine the role that foreign-invested companies play in the economy at the regional level. The significance of the foreign direct investment for the regional economy was conducted using the example of sixteen Polish voivodships. For the purpose of the study the Vector Measure Construction Method (VMCM) was used to determine the importance of FDI for the economies of each Polish provinces (voivodships) and to produce their ranking and classification. According to the study findings, voivodships where the examined problem was of a similar nature were assigned to particular classes. A definite leader was the Mazowieckie voivodship, which was the only one to be included in Class I. The most numerous Class II included 11 voivodships, which constituted approximately 70% of the total number of provinces. Four voivodships fell in Class III, comprising entities with the lowest aggregate measures. This means that Polish regions are mostly homogeneous in terms of the importance of foreign direct investment to the performance of their economies.