Foreign direct investment in the business services sector
Research project financed by the National Science Centre (NCN), Poland
Period: 2016-2020
Principal investigator: Prof. Artur Klimek [see more information about the researcher]
Description
The primary objective of the research project is to provide systematic and up-to-date knowledge about the determinants and implications of foreign direct investment (FDI) in the business services
sector. The sector includes: business process outsourcing, shared service centres, information technology outsourcing and research and development centres.
Implementation of the main goal will take a form of development of an innovative economic model of multinational corporations (MNCs) comprising advanced business services.
Afterwards, the theoretical assumptions will be verified using quantitative methods based on a unique dataset.
The empirical research will be conducted on the population of companies providing modern business services and, at the same time, being foreign subsidiaries of MNCs in Central and Eastern European
countries. The selection of these economies is justified by a significant increase in number and value of investment projects in the analysed sector in the last decade.
Research on inflows of FDI to the business services sector is justified by the major gaps in theoretical and empirical knowledge on the one hand, and significance and relevance of the identified
economic phenomenon on the other hand. The proposed issue requires thorough examination due to the increasing role of the business services sector in many countries, including the economies of
Central and Eastern Europe, with particular emphasis on Poland. One of the measures of the significance of business services sector is the level of employment, which had reached 150,000 in Poland
in year 2015, including 130,000 in enterprises with foreign capital. Approximate numbers of jobs in other countries in the region are as follows: Hungary – 50,000; Czech Republic – 40,000; Slovakia
– 30,000. According to some estimates in the coming years, this level may rise to about 1 million throughout the region.
Progress
Open access book
Research reports:
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Klimek, A. Offshoring of white-collar jobs: perspective of host economy – Research report no. 2 (November 2018) [download]
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Klimek, A., Advanced business services and multinational corporations – Research report no. 1 (October 2018) [download]
Original research articles:
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Klimek, A. and M. Sass, Offshoring white collar jobs and structural change in host economies: the regional dimension, Eurasias Geography and Economics, [in
print], 2021 [IF=2,267] [access article]
Abstract
The main objective of the paper is to investigate the extent to which inward foreign direct investment (FDI) in advanced business services (ABS) – a result of so-called offshoring of
white collar jobs – contributes to the structural change of employment in regions of host economies. We use a fixed-effect regression model based on cross-regional panel data for Hungary and Poland
for the period between 2005 and 2014. Our findings show that ABS FDI carries structural impacts: employment in foreign-owned firms increases the share of the tertiary sector in a region both
directly and indirectly through inducing other tertiary activities as well.
JEL Classification: F21; F23
Keywords: offshoring, foreign direct investment, advanced business services, regions, Central and Eastern Europe
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Klimek, A., Offshoring of white-collar jobs: theory and evidence, International Journal of Management and Economics, Vol. 57, Issue 1, 2021: 69-84 [download]
Abstract
Foreign direct investment (FDI) in advanced business services (ABSs), referred to here as the offshoring of white-collar jobs, has become one of the major developments in the
operations of multinational corporations (MNCs). However, a specific theoretical approach to this phenomenon has not been adequately defined. In this article, we have two objectives. The first
objective is to outline the key elements of the theoretical framework and introduce a simple formal model for business services within MNCs. The second objective is to verify the assumptions of the
model in the empirical part. We use the sample of the largest European companies having foreign affiliates. Special attention is paid to Visegrád economies (i.e. Czech Republic, Hungary, Poland,
and Slovakia) as host economies. We applied here a multinomial logistic model, which indicates the probability of having an ABS subsidiary taking into consideration the characteristics of
MNCs.
JEL Classification: F21; F23
Keywords: advanced business services, Europe, foreign direct investment, multinational corporation
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Klimek, A., Determinants of foreign direct investment in the modern business services, Acta Oeconomica, Vol. 70, Issue 3, 2020: 407-421 [IF=0,875]
[access article]
Abstract
This paper is aimed at investigating determinants of recent flows of foreign direct investment (FDI) into advanced business services (ABS)
in the European Union with the distinction between “old” (till 2004) and “new” member states (after 2004 extension). Special attention is put on the Visegrád countries. The factors affecting
location decisions of multinational corporations were analysed at the national and regional level. The latter approach proved to be very effective due to the fact that foreign companies operating
in ABS are highly unequally distributed across economies. Indeed, there are only few regions in economies attracting bulk of the operations in ABS.
The research method applied in the paper is negative binomial regression, which measures the probability of occurrence of an ABS foreign firm in an economy or a region taking into consideration
its characteristics. This research combines macroeconomic, regional and firm-level data. The explanatory variables are divided into two groups: demand and supply. The main conclusion is the high
significance of the supply factors. In other words, foreign companies focus on locations offering large number of skilled workers at reasonable prices. The key recommendation for governments
interested in attracting ABS type of investment is to focus on the quality of human capital.
JEL Classification: F21; F23
Keywords: foreign direct investment, modern business services, regions, European Union
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Klimek, A. Advanced business services in the global economy and Visegrad Group economies, International Buisness and Global Economy, No. 37, 2018:
399-408 [download]
Abstract
The paper aims to present recent trends in global trade and investment in advanced business services (ABS). Special attention is given to the position of Visegrád countries in
international movements of services and associated activities. The research method applied in the study is the statistical analysis of aggregate data on trade and FDI. The data were extracted
from WTO and OECD databases. The main finding is that services are still less traded than merchandise. Still, knowledge-intensive services are gaining importance as their share in trade of
services reaches 15%. As a result of the study, major problems with data regarding services were identified. The results confirm the global importance of the services based on knowledge. This is
significant, as ABS create a narrow group of specialized services. Importantly, ABS are quite inclusive and many emerging economies become global providers of such services.
Key words: advanced business services, international trade, foreign direct investment
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Klimek, A., Agglomeration economies and foreign direct investment in advanced business services in Poland, International Journal of Management and Economics,
Vol. 54, Issue 1, 2018: 69-79 [download]
Abstract
For many years, services attracted most of the foreign direct investment (FDI) in Central and Eastern European countries. Recently, a distinctive
type of business services, i.e., advanced business services (ABS), has become the focal point in FDI in the region. This paper is aimed at defining the role of agglomeration economies in FDI in ABS
in Poland. The topic is important from the policy point of view, as foreign investment is supported by the host country’s authorities, and various incentives are provided. The research method
applied in this paper is the negative binomial regression. The outcome variable was the number of firms operating in ABS in particular regions. Explanatory variables pertain to the characteristics
of 16 regions classified as Level 2 under the Nomenclature des Unités territoriales statistiques (Nomenclature of Territorial Units for Statistics or NUTS) in Poland. The main conclusion of the
research is that agglomeration economies are important in the decision of the firms investing in ABS in Poland. The most important factor is the concentration of supply factors, such as abundance
of educated employees. The specific features of ABS are associated with lower importance of demand factors in a region.
JEL Classification: F21, F23
Keywords: modern business services industry, foreign direct investment, agglomeration economies
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Klimek, A., Advanced business services in emerging Asian economies, Research Papers of Wrocław University of Economics, No. 486, 2017 [download]
Abstract
The goal of this paper is to present the results of the empirical analysis of the role of emerging Asian economies in the global market for business services. The focus is on
India, as the leader in advanced business services in the region. The method applied in this paper is the quantitative analysis of data related to trade and foreign direct investment in services.
The novelty of the paper lays in focusing on business services through their international exchange and activities of multinational corporations. This papers aims to focus on broader economic
perspective rather than usual offshoring. The main conclusion of the paper is the rising role of services in economies that were previously focused on manufacturing and merchandise trade. Both
due to the structural changes in foreign markets and home governments’ policies the process of tertiarisation is taking place. Special focus is on advanced business services which require
and create vast amount of knowledge.
Keywords: Asia, India, advanced business services, exports, foreign direct investment
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Klimek, A., Effects of foreign direct investment in business services in Poland, Research Papers of Wroclaw University of Economics, No. 498, 2017: 141-148
[download]
Abstract
The main goal of the paper is to investigate the impact of foreign direct investment (FDI) in advanced business services sector on economic development. We analyse the topic on the
regional level as FDI in Poland is not equally distributed across the country. In order to investigate the research problem we estimate linear regression model using panel data. The dependent
variable is the value of GDP per capita as the indicator of economic development. The most important independent variable from the point of view of the main objective of the paper is the number of
foreign-owned advanced business services firms. This variable will be also lagged to control for time necessary for investment to materialise and influence the economy. The main conclusion of the
analysis of data over the period of 10 years is that there is a positive influence of operations of foreign-owned firms in analysed sector on the economic growth of particular regions in
Poland.
JEL Classification: F21; F23
Key words: advanced business services, foreign direct investment, Poland
