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The Impact of Enlargement on the Race for FDI

Bellak, Christian (2004) The Impact of Enlargement on the Race for FDI. Department of Economics Working Paper Series, 86. Inst. für Volkswirtschaftstheorie und -politik, WU Vienna University of Economics and Business, Vienna.

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Abstract

This chapter assesses the effects of "Eastern" EU-enlargement on the race for FDI and the policy implications. We start from the proposition that the evolving production patterns of incumbent and new member states determine the need for and the justification of location policy (LP) and FDI promotion policy (FDI-PP). On the basis of empirical production patterns, it is argued that while the specialisation outcome dominates in the short run, the convergence scenario is more likely to prevail in the medium term. Therefore, old and new EU-members will compete increasingly for the same type of FDI. How EU-enlargement per se affects the spatial distribution of inward FDI is described next. The role of FDI-PPs and LPs in an enlarged EU are discussed on the basis of the convergence outcome. Since the new economics of location competition and of FDI-promotion cast serious doubt on the economic justification and effectiveness of FDI-PP, the chapter concludes with a basic dilemma in the race for FDI: namely, the greater ineffectiveness of FDI incentives in the Single Market and fewer possibilities for differentiation of LPs. The latter is due to harmonisation pressures, which calls for innovative policy strategies by central and regional authorities. (author's abstract)

Item Type: Paper
Additional Information: erscheint in: Pervez Ghauri and Lars Oxelheim (Eds.) European Union and the Race for Foreign Direct Investment in Europe, Oxford: Elsevier, 2004
Keywords: Multinational Enterprises / Foreign Direct Investment / Locational Competition / Location Policy
Classification Codes: JEL F2, L6
Divisions: Departments > Volkswirtschaft
Depositing User: Repository Administrator
Date Deposited: 07 Jan 2004 11:30
Last Modified: 22 Jan 2015 19:06
URI: http://epub.wu.ac.at/id/eprint/804

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