Ibrahim Shaheen (p)

Zoltan Gal

This paper investigates the role of firm interconnectedness in explaining firm resilience. We focus on the outward foreign direct investment (FDI) and how it affects the firm ability to withstand and recover from the great recession shock of 2008. We also address the role of regional interconnectedness at the NUTS-3 level for firm resilience. Using a fixed-effect panel data model for over 13,000 Italian manufacturing firms during the post-shock period 2008-2011, we provide evidence that firm resilience is positively associated with firm interconnectedness. Moreover, we find that the firms, which operate in more interconnected regions enjoy a better resilience than firms that operate in relatively remote regions. Furthermore, we find that the interaction between firm- and regional-level interconnectedness is positively associated with firm resilience.

Eduardo Haddad, Inacio Araujo (p), María Eugenia Ibarrarán, Alejandra Elizondo

Ibrahim Shaheen

There is substantial value-added of services incorporated in goods exports, from intermediate services and from services bundled with goods. In the quest for increasing and sustaining its competitiveness in Global Value Chains (GVC), Mexico still requires policies, capabilities, and infrastructure to promote intermediate services. On one hand, the continuing development and upgrade of its connectivity infrastructure, to enhance the productivity of distribution, transportation, and communication services, will help to promote linking tasks within and across countries. Locational aspects of these groups of sectors, especially transportation services, are associated with relatively less concentrated spatial patterns, as production and consumption are more strongly locationally interdependent. On the other hand, KIBS tends to be highly concentrated at a country level. However, this does not exclude some movements towards dispersion observed in some business services, as long as working skills limitations are surpassed, which may give room for coordinated regional and trade policies to enhance participation in value addition in Local Value Chains (LVC) of peripheral, natural resource-rich, exporting regions. To explore the effects of such policies, we use an interregional computable general equilibrium (ICGE) model for Mexico. We simulate the impacts of TFP-enhancing shocks faced by Mexican KIBS sectors. The ICGE model recognizes the economies of the 32 Mexican States and 37 sectors. The initial results point to different effects on the two major export value chains in the country, namely the maquiladoras in the USA-Mexico border, and the oil value chain mainly associated with the States in the Gulf.

Zoltán Gál (p), Andras Gyimesi

Inacio Araujo

In Central & Eastern Europe economic transformation was primarily driven by foreign direct investment (FDI) during the postsocialist transition. The paper examines the effects of FDI on GDP growth and Gross Fixed Capital Formation (GFCF), and tests the causal relationship between these variables in the Hungarian regions. The econometric analysis confirms that GDP growth is not the cause of FDI inflows, but more FDI flows into the already more developed regions. In addition, there is no significant effect of FDI on regional GDP growth in a panel regression controlling for GFCF, employment, R&D and the global financial crisis. The paper argues that in the absence of endogenous growth factors in FDI-driven dependent market economies of CEE, FDI alone is not sufficient to ensure the positive spillover effects and the long-term prosperity of regions. This reinforces the negative perception of economic transition and strengthens anti-EU populist parties and governments' search for an economic policy alternative to FDI.