Vertical and horizontal foreign direct investments in transition countries [Elektronische Ressource] / vorgelegt von Alexander Protsenko

Protsenko, Charles Wesley Alexander

Informations

• Publié par: ludwig-maximilians-universitat_munchen
• Publié le: 01 janvier 2004
• Nombre de lectures: 30
• Langue: English

Extrait

Vertical and Horizontal
Foreign Direct Investments
in Transition Countries
Inaugural-Dissertation
zur Erlangung des Grades
Doctor oeconomiae publicae (Dr. oec. publ.)
an der Ludwig-Maximilians-Universitat¨
Munc¨ hen
2003
vorgelegt von
Alexander Protsenko
Referent: Professor Dr. Dalia Marin
Korreferent: Professor Dr. Monika Schnitzer
Promotionsabschlussberatung: 11. Februar 2004Contents
1 Introduction 1
1.1 Foreign Direct Investments: Definitions and Recent Trends . . 3
1.2 The Special Case of Transition Countries . . . . . . . . . . . . 7
1.3 Survey of German FDI in Eastern Europe . . . . . . . . . . . 9
1.4 Contributions of the Thesis . . . . . . . . . . . . . . . . . . . 10
2 Vertical and Horizontal FDI: Theories and Empirical Evi-
dence 13
2.1 Theoretical Background . . . . . . . . . . . . . . . . . . . . . 13
2.1.1 Horizontal FDI . . . . . . . . . . . . . . . . . . . . . . 16
2.1.2 Vertical FDI . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1.3 Knowledge Capital Model . . . . . . . . . . . . . . . . 22
2.2 Empirical Evidence . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3 FDI Life Cycle in Transition Countries 34
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.1 Economic Environment . . . . . . . . . . . . . . . . . . 38
3.2.2 Four Cases. . . . . . . . . . . . . . . . . . . . . . . . . 41
3.2.3 Results and Discussion . . . . . . . . . . . . . . . . . . 49
3.3 Descriptive Analysis . . . . . . . . . . . . . . . . . . . . . . . 52
3.3.1 Changes in Country characteristics . . . . . . . . . . . 52
3.3.2 Changing Structure of FDI Inflows . . . . . . . . . . . 55
I3.4 Empirical Evidence . . . . . . . . . . . . . . . . . . . . . . . . 59
3.4.1 Hypotheses . . . . . . . . . . . . . . . . . . . . . . . . 59
3.4.2 Estimation . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.4.3 Results and Discussion . . . . . . . . . . . . . . . . . . 65
3.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
3.6 Appendix: Mathematical Derivations . . . . . . . . . . . . . . 72
4 Employment Effects of Vertical and Horizontal FDI 77
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
4.2 Model of Cross Border Employment Effects. . . . . . . . . . . 81
4.2.1 Horizontal Division of Production . . . . . . . . . . . . 83
4.2.2 Vertical Division of Production . . . . . . . . . . . . . 85
4.3 Empirical Evidence . . . . . . . . . . . . . . . . . . . . . . . . 88
4.3.1 Empirical Definitions of Vertical and Horizontal FDI . 89
4.3.2 Vertical and Horizontal FDI in CEE . . . . . . . . . . 93
4.3.3 Estimation . . . . . . . . . . . . . . . . . . . . . . . . . 96
4.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
4.4.1 Estimation Results . . . . . . . . . . . . . . . . . . . . 99
4.4.2 Comparison with Previous Empirical Studies . . . . . . 106
4.5 Conclusions and Implications . . . . . . . . . . . . . . . . . . 108
4.6 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5 TheGood,theBadortheIrrelevant: VerticalandHorizontal
FDI in the Czech Republic 114
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
5.2 Vertical and Horizontal FDI in the Czech Republic . . . . . . 118
5.2.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
5.2.2 Composition of German FDI . . . . . . . . . . . . . . . 119
5.2.3 Differences between Vertical and Horizontal FDI . . . . 121
5.2.4 Industry Distribution . . . . . . . . . . . . . . . . . . . 125
5.3 Spillover Effects . . . . . . . . . . . . . . . . . . . . . . . . . . 129
5.3.1 Channels for Spillover Effects . . . . . . . . . . . . . . 129
II5.3.2 Estimation . . . . . . . . . . . . . . . . . . . . . . . . . 132
5.3.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
5.4 Other Host Country Effects . . . . . . . . . . . . . . . . . . . 138
5.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
6 Conclusion: Summary of Results and Outlook 143
Bibliography 147
IIIList of Figures
1.1 Structure of International Capital Flows . . . . . . . . . . . . 4
2.1 Vertical and Horizontal FDI in the KC-model . . . . . . . . . 24
3.1 FDI Life Cycle: Four Cases . . . . . . . . . . . . . . . . . . . 40
3.2 FDI Incentives and the Size of the Foreign Market . . . . . . . 50
3.3 Share of Vertical FDI in CEE over Time . . . . . . . . . . . . 56
3.4 Share of Backward and Forward Vertical FDI in CEE . . . . . 57
5.1 Time Pattern of Different FDI Types in the Czech Republic . 121
IVList of Tables
1.1 Worldwide FDI and Selected Economic Indicators . . . . . . . 5
1.2 Foreign Direct Investment in Selected CEE Countries . . . . . 6
2.1 Conditions for the Existence of Vertical and Horizontal FDI . 19
2.2 Empirical Evidence for Vertical and Horizontal FDI . . . . . . 26
3.1 ChangesofMarketSizeandProductionCostsinCEECountries 53
3.2 Share of Foreign Owned Enterprises in Selected CEE Countries 54
3.3 Variables and Data Sources for Chapter 3 . . . . . . . . . . . 63
3.4 Regression Results: Vertical vs. Horizontal FDI . . . . . . . . 66
3.5 Regression Results: Backward Vertical vs. Horizontal FDI . . 69
3.6 Price Function for the Input Good: Summary . . . . . . . . . 74
4.1 Definitions and Shares of Vertical and Horizontal FDI . . . . . 91
4.2 Motivation for Vertical and Horizontal FDI . . . . . . . . . . . 93
4.3 Shares of Vertical and Horizontal on Total FDI in CEE . . . . 95
4.4 Expected Signs of the Labour Demand Function . . . . . . . . 98
4.5 Estimation of Labour Demand: Type I . . . . . . . . . . . . . 101
4.6 Estimation of Labour Type II . . . . . . . . . . . . . 103
4.7 Estimation of Labour Demand: Type III . . . . . . . . . . . . 105
4.8 Comparison with Previous Studies. . . . . . . . . . . . . . . . 107
5.1 Vertical and Horizontal FDI in the Czech Republic . . . . . . 120
5.2 Technology Used by Vertical and Horizontal FDI . . . . . . . 124
5.3 German FDI in the Czech Republic: Sector Distribution . . . 126
V5.4 Distribution in Manufacturing Industry . . . . . . . . . . . . . 128
5.5 Impacts of Vertical and Horizontal FDI on Domestic Firms
through Different Spillover Channels . . . . . . . . . . . . . . 130
5.6 Variables and Data Sources for Chapter 5 . . . . . . . . . . . 135
5.7 Regression Results: Spillover Effects. . . . . . . . . . . . . . . 137
VIList of Abbreviations
BEA Bureau of Economic Analysis
CEE Central and Eastern Europe
CIS Commonwealth of Independent States
EBRD European Bank for Reconstruction and Development
EU European Union
IMF International Monetary Fund
IUI Institute of Industrial Economics
HFDI Horizontal foreign direct investment
FDI Foreign direct investment
FOE Foreign owned enterprise
GDP Gross Domestic Product
KC Knowledge Capital-Model
MNE Multinational enterprise
NBER National Bureau of Economic Research
OECD Organisation for Economic Co-operation and Development
OLS Ordinary least squares
R&D Research and Development
ULC Unit Labour Costs
UNCTAD United Nations Conference on Trade and Development
UNECE United Nations Economic Commission for Europe
US United States
VFDI Vertical foreign direct investment
WIIW Wiener Institut fur¨ Internationale Wirtschaftsvergleiche
VIIAcknowledgments
During the course of writing this thesis I have benefited from the help and
support of a large number of people. First of all I would like to thank my
adviser Prof. Dr. Dalia Marin for her guidance and excellent support, both
academically and personally. With boundless energy and enthusiasm she
has encouraged and supported my research during the last years. I am also
deeply grateful to Prof. Dr. Monika Schnitzer for her profound comments
on various parts of this thesis.
I would like to thank my colleagues at the Chair for International Eco-
nomics, Alexander Raubold, Andzelika Lorentovicz, Frank Hauser and Pe-
ter Beermann for their great support. I would particularly like to thank
Daniel Sturm for his comments and insightful discussions as well as Antonio
Garcia Pascual for his encouragement during my first steps as an empirical
economist.
I am also indebted to my other colleagues from the Economics Depart-
mentandwouldspeciallyliketothankThomasMuller,¨ ChristaHeinz,Joahim
Wolff and Ariane Breitfelder who shared important suggestions on different
parts of the thesis.
The participants of the Research seminar at the University of Munich as
well as Peter Neary, Kevin Deny, Vincent O’Sullivan and the participants of
the Applied Economics Workshop at the University College Dublin helped
with many insightful remarks on Chapter 3. Volkhart Vincentz, Richard
Frensch, Marc Muendler and the participants of the Seminar at the Institute
forEasternEuropeinMunichbroughtvaluablecommentsonanearlyversion
of Chapter 4.
The empirical part of the thesis is based on a firm survey of German
multinationalenterpriseswhichhaveinvestedinCentralandEasternEurope.
Therefore,Iamdeeplyindebtedtoallthefirmsthatfoundthetimetoanswer
VIIIour endless questions and made the empirical investigation possible. The
perso