Foreign Direct Investment in Hungary: Resource Acquisition and Domestic Competitive Advantage

Abstract

This paper examines the impact of foreign direct investment on the marketing resources and capabilities of firms in Hungary. Foreign direct investment into Hungary has been substantial in recent years and is credited as a major factor in leading the transition towards a market-led economy. While the motives of foreign investors to invest and of governments to attract investment have been extensively addressed in the literature, there has been little research on the reasons why individual host firms seek to attract investment. This paper develops a theoretical explanation of host firm motives through the resource-based theory of the firm, proposing that host firms seek resources from their investors that can then be deployed to create competitive advantage over rivals in the domestic market. A series of specific propositions are developed and tested empirically on a large sample of Hungarian enterprises.