International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Foreign Direct Investments and Industrial Policy: A Comparison of Results for the Cases of Slovenia and Hungary
Albert Puig-G├│mez

Conventional economic theory predicts that foreign direct investment will be a key source for the restructuring of the productive systems of the host economies. This paper analyse the contribution of this type of investment to structural change in five Central European countries (Slovakia, Slovenia, Hungary, Poland and the Czech Republic) during their process of systemic transition (1993-2001). The key question to answer is if the foreign capital has positively contributed to the change in the export specializations of those countries. From a comparison between Hungary and Slovenia, which have adopted different industrial policies related to foreign direct investment, the study shows that multinational firms contributed significantly to the structural change in all of these economies but also, and except in Slovenia, they became a source of segmentation of the local production system. It notes that the type of industrial policy explains largely the different effects of FDI on the local production systems.

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