The structure of FDI competition in Central and Eastern Europe: Do they compete or cooperate in attracting FDI?

초록

This paper investigates the structure of foreign direct investment (FDI) competition among five countries - Bulgaria, Czech Rep., Hungary, Poland and Slovakia - in Central and Eastern Europe (CEE). Special attention is given to the question whether the CEE countries are competing or complementing each other in attracting FDIs. Using the FDI performance of the five CEE countries during 1996-2008, it was found that fundamental economic factors, such as the market size of host country, distance between host and home country, and labor abundance of host country are significant factors in attracting FDI inflows. System GMM was used to examine a possible interaction of each other's FDI performance: The empirical result shows that none of the countries affects negatively to the FDI inflows of neighboring countries; rather, there is a strong synergetic effect to the FDI inflows of neighboring countries; Poland leads FDIs in the CEE region. The relationship is further strengthened by a positive regional agglomeration effect in attracting FDI.

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