Foreign direct investment as a factor of trade development: cases of selected countries

Abstract

The purpose of the article is to identify the specifics and common features of the foreign direct investment (FDI) impact on foreign trade development in the Visegrad Group countries (the Czech Republic, the Republic of Hungary, the Republic of Poland and the Slovak Republic), to determine trade-related effects of FDI in the economies and the factors that caused them, as well as to highlight key points of the policy of FDI-led export expansion. The methodological basis of the study is presented by the theories of FDI and capital transnationalization that affect the FDI and international trade nexus, as well as the global value chains (GVCs) theories. The information base for the study was the UNCTAD data on FDI stock, FDI flows, merchandise and services exports and imports of the Visegrad countries for the period 1995-2017, as well as the databases of WTO, Eurostat and Central statistical offices of the Visegrad countries. The paper adds to the understanding the FDI and foreign trade nexus in a recipient country. The quantitative and qualitative trade-related effects of FDI attracted into the Visegrad Group countries are determined and calculated, the factors caused them are revealed. Econometric assessments of the relationship between FDI and export-import operations in the studied economies are carried out, tools for forecasting the export effects of FDI are developed. Key points of the policy of FDI-led export expansion are highlighted.

Impact of Foreign Direct Investment on Host Country’s Development: A Case Study

“…In the long run, a diversified export portfolio reduces the risk of dependence on domestic markets and makes the recipient country more attractive for long-term investments. Summing up, capital flows from FDI can significantly improve the country's balance of payments by increasing exports, reducing the trade deficit, and contributing to the stability and growth of the economy (Awan & Mukhtar, 2019;Shmarlouskaya et al, 2021;Kato & Chiloane-Tsoka, 2022). The ratio of FDI to exports is symbiotic since one supports the other, promoting economic growth, diversification, and stability in the beneficiary country while attracting more FDI.…”

Foreign Direct Investments in Poland against Countries of Visegrad Group

“…On the one hand, there is no direct evidence that FDI affects the rate of changes in economic growth (Gwiazda, 1998); on the other hand, broad benefits arising from the influx of such investments are indicated (Mączyńska, 1999). Foreign direct investment is the main element of supplementing capital shortages in economies (Karaszewski, 2004;Jaworek, 2006), as well as being a source of creating new jobs (Gorynia et al, 2006;Wawrzyniak, 2017;Witkowska, 2000), stimulating new exports (Cieślik, 2016;Nazarczuk et al, 2020aNazarczuk et al, , 2020bShmarlouskaya, 2021), and transferring knowledge and technology (Kuzel, 2017). At the same time, the role of FDI in finances, competitiveness of enterprises, connections with local companies and communities and even ecology is suggested (Adler & Stevens, 1974;Lin, 1995;Bojar, 2001, Karaszewski, 2004Kojima, 2000;Ozawa, 1992;Pakulska & Poniatowska-Jaksch, 2004).…”

Innovative Foreign Direct Investment Policy: Latvia’s Case

“…Literature Review. Foreign direct investment (FDI), as an additional source of capital, is an essential determinant of economic growth in most countries (Mazzanti et al, 2020;Khan et al, 2020;Kaliyeva et al, 2020;Mehmood et al, 2021;Shmarlouskaya et al, 2021;Karpenko et al, 2021). In addition, the host countries, as many authors rightfully claim, considerably benefit via technology transfer resulting from the presence of FDI (Cieslik et al, 2016;Hilkevics and Hilkevics, 2017;Rausser et al, 2018;Khalatur et al, 2021;Buhaichuk et al, 2021;Burinskas et al, 2021;Kucera and Fiľa, 2022;Radavicius and Tvaronavicienė, 2022).…”