The Role of FDI in Regional Innovation and Its Influence on the Emergence of Knowledge Spillover Effects

Abstract

Innovation plays a crucial role in regional development. There are a lot of ways how regional innovation could occur. One of them, important specially for less developed countries, is through foreign direct investment (FDI). Still, how these external flows of knowledge and innovation can influence regional growth and which policies are relevant to support them are not yet fully understood. This is especially important for CEE regions, which still show limited local knowledge and innovation endowment compare to European research area. We approached these issues by concentrating on the successful development of the automotive sector in Western Slovakia. Vast majority of companies in the sector are foreign owned, so the regional capabilities to utilize FDI as a most important source of knowledge and innovation are investigated. We chose the case study methodology based mainly on interviews with different actors in the industry. We showed the reasons and preconditions for the successful sector’s development from adaptive to an endogenous innovation pattern. As result, evidence suggests that national policies’ effectiveness very much depended on being tailored to regional and sector conditions for innovation creation or acquisition.