Eric Rugraff

Strengths and weaknesses of the outward FDI paths of the Central European countries

This article uses foreign direct investment (FDI) annual reports of central banks and annual reports of the largest firms to study the outward foreign direct investment (OFDI) of the Central European countries. Four countries – the Czech Republic, Hungary, Poland and Slovenia – are the source of the predominant part of the OFDI stock of the Central-Eastern European area. Since the beginning of the 2000s the OFDI of the Central European countries has increased sharply. A small number of large horizontal multinationals investing in the neighbouring countries account for the bulk of the OFDI flows and stock. We distinguish three different OFDI paths and analyse the strengths and weaknesses of each one: the Czech and Hungarian path is characterised by the pivotal role of the foreign-owned multinationals in the OFDI process. The Polish OFDI path differs from the Czech and Hungarian path by the central role played by the state-owned extractive and infrastructure companies in the Polish FDI abroad. In Slovenia, the OFDI path takes the form of investments by private indigenous-grown multinationals that have successfully set up subsidiaries in the neighbouring countries.

Foreign Direct Investment (FDI) and Supplier-Oriented Upgrading in the Czech Motor Vehicle Industry

Rugraff E. Foreign direct investment (FDI) and supplier-oriented upgrading in the Czech motor vehicle industry, Regional Studies. The Czech Republic has succeeded in building a new comparative advantage in motor vehicle and motor component production. Yet, the Czech-owned companies only contribute weakly to the Czech upgrading. The Czech-owned companies are totally absent from first-tier suppliers and are only linked by casual technological relationships to foreign-owned multinational subsidiaries. This kind of relationship limits the vertical spillovers from foreign-owned multinational subsidiaries and is responsible for the existence of a weak link in the Czech automotive system that may foster the relocation of foreign-owned subsidiaries in foreign countries.

The new competitive advantage of automobile manufacturers

Purpose – The literature identifies different sources of competitive advantages. The purpose of this paper is to suggest that an efficient articulation of a Voice behavioral model and an Exit behavioral model can result in a sustained competitive advantage for automobile manufacturers.Design/methodology/approach – The paper builds on the analytical framework of the global value chain literature to analyze how the combination of hierarchy, relational linkages and market linkages creates additional assets. The case of Volkswagen‐Skoda in the Czech Republic is used to illustrate the combination of Voice and Exit relationships.Findings – The paper suggests that the competitive advantage of automobile manufacturers crucially depends today on the combination, on the one hand, of the “relational rent” provided by the cooperation with global suppliers, and on the other hand, of the “switching rent” provided by the absence of implication in the relationship with lower‐tier suppliers.Originality/value – The paper r...

Voting for staying. Why didn’t the foreign-owned automotive component suppliers relocate their activity from Hungary to lower-wage countries as a response to the economic crisis?

Abstract On the basis of interviews with 10 foreign-owned automobile component suppliers in Hungary and the collection of indirect information, this article explains why the multinationals did not relocate their activity from Hungary to lower-wage countries as a response to the economic crisis. We suggest that the four ‘keep factors of location’ – additional investments of the automobile manufacturers, unchanged labour market regulation, changes in government policy and the existence of few alternative sites of relocation – were more dominant than the two main ‘push factors of relocation’ – relatively low sunk costs and low dependence on the local environment.

How Did the Automotive Component Suppliers Cope with the Economic Crisis in Hungary

Abstract This article studies the reaction of automotive component suppliers in Hungary to the 2008–2009 economic crisis. We find that the global suppliers viewed the crisis as an opportunity to reinforce the competitiveness of their Hungarian affiliates by engaging in product and process upgrading, and upgrading through research and development. The regional suppliers combined defensive strategies aimed at reducing costs with offensive measures in the form of product upgrading, production upgrading and expansion into new markets. The local suppliers reduced costs and reduced their workforce, but also reacted offensively by expanding into new markets, upgrading their activity and collaborating with other local suppliers.

Why are spillovers through backward linkages from multinational corporations in the Czech motor industry still limited

This article uses the AMADEUS firm-level database and annual reports of companies to study spillovers through backward linkages from multinational corporations onto indigenous suppliers in the Czech motor industry. We use financial and non-financial indicators of foreign-owned and indigenous suppliers to define quantitative indicators to evaluate the quantity and quality of backward linkages. We suggest that the impact of MNCs on the quantity of backward linkages is mixed: in our sample Czech-owned suppliers represent half of the companies but they contribute only little to the total turnover of the suppliers. The new position of follow-source suppliers in the motor industry value chain explains the fragile position of indigenous suppliers in small emerging economies. The presence of numerous foreign-owned affiliates belonging to global MNCs, with whom the manufacturers are engaged in relational linkages on a world scale, also explains the absence of interest of the MNCs in relational linkages with the indigenous supply base.