What attracts multinational enterprises from the new EU member states to Poland?

Andrzej Cieślik

doi:10.1007/s40821-019-00122-z

Abstract

The main goal of this study is to examine empirically the determinants of multinational activity of firms from the new EU-12 member states in Poland during the period 1990–2014 using the negative binomial model. In particular, we test the predictions of competing theoretical models of the multinational enterprise to identify the investment motives for undertaking foreign direct investment in Poland. In addition to traditional country-pair characteristics such as absolute and relative market size and differences in relative factor endowments, in this study we account for cultural differences between the host and partner countries that may affect the cost of foreign investment. The assembled empirical evidence points to both market access and efficiency seeking as the main reasons for undertaking foreign direct investment in Poland by multinational enterprises based in the new EU-12 member states. However, cultural proximity does not seem to be an important factor in explaining the extent of multinational activity in Poland.

Highlights

Multinational enterprises (MNEs) with their rapidly increasing shares in world output, investment and trade flows have become key actors in the ongoing process of globalization in the world economy
This study used the negative binomial model to examine empirically the main reasons for multinational activity of firms originating from the new European Union (EU) member states in Poland during the period 1990–2014
The estimated specification of the empirical model was based on the modified knowledge-capital model with two types of capital in which both horizontally- and vertically-integrated firms could coexist in equilibrium

Summary

Introduction

Multinational enterprises (MNEs) with their rapidly increasing shares in world output, investment and trade flows have become key actors in the ongoing process of globalization in the world economy. Eurasian Business Review (2020) 10:253–269 developed and developing countries, an increasing fraction of FDI becomes located in the emerging market economies. According to the second one, MNEs can be regarded as vehicles to overcome distance and lower costs of foreign markets access. These two alternative reasons have very different empirical implications. The purpose of this study is to test the predictions of several competing theoretical models of the multinational enterprise and identify the investment motives for undertaking FDI in Poland using bilateral dataset on the activity of MNEs from the new EU-12 member states covering the period 1990–2014. The majority of empirical studies on FDI determinants in Poland have so far focused on the investments made by multinational enterprises coming from the developed countries, and in particular from the old EU-15. The summary of the main findings and potentially fruitful future research avenues are located in the concluding section

Literature summary and theoretical background

Data sources and statistical methodology

Empirical results

Findings

Conclusions