Balázs Páger (p)

Zsuzsanna Zsibók

The foreign-owned companies and their impacts on the various dimensions of the economy (both on national and sub-national levels) might be a crucial issue in those countries whose economy relies significantly on them, like Hungary but also other CEE countries. Reviewing the literature, several papers can be found that discuss the potential role of foreign-owned firms. In this way, these studies investigated the role of these companies in bringing in new knowledge and enhancing regional R&D; their impact on the differences in growth trends among Hungarian counties; or their function in pursuing entrepreneurial activity in the national level. Still, studying the potential influence of foreign-owned companies on the business dynamics in the level of agglomeration areas might provide an additional part to the stream of literature investigating the overall role of foreign-owned firms in the Hungarian economy. This study will contribute to this field by investigating the question of how foreign-owned companies influence business dynamics in Hungary's agglomeration areas. Along with this research question, two preliminary hypotheses are structured. On the one hand, it is assumed that the presence of foreign-owned companies may support the entry of new firms due to providing opportunities for local suppliers (effects on related activities), and it might also offer demand for products and services in the region (effects on non-related activities). On the other hand, there is expected to be a spatial limit to this positive effect of entry. Hence, this impact might become weaker far from the centre of the agglomeration area. Building on a panel dataset of Hungarian firms provided by the Databank of the Centre for Economic and Regional Studies, the paper analyses whether the effects of foreign-owned companies on firm entries are negative or positive. In the frame of this investigation, we attempt to reveal both the cross-sectional (region, industry) impacts and the spatial effects.

Gabor Lados (p), Zoltan Gal

Balázs Páger

Enlargements of the EU intensified the migration of labour force in Europe, which has controversial effects. On the one hand the home country may face with economic problems due to the lack of skilled workers, however, on the other hand migration is not a one-way process and out-migrants could return with competitive (e.g., language, technical, management) skills which has positive influence on the productivity. Economic centres of the home country could be not just the target areas of return migrants, but foreign direct investment (FDI) as the presumed drivers of economic growth in the Visegrad countries (V4) may also favour these regions. While the most dynamic economic centres (e.g., the capital or regional centre and its agglomeration) were focal points of investments and enjoyed the increase of population, border regions suffered from the opposite outcomes. The loss of population, whether it happens due to natural change or out-migration, means a real threat for the region, both in an economic and in a demographic context. The aim of this presentation is to investigate the linkage between FDI and migration and explore the spatial characteristics of these phenomena. In our case study, we try to reflect how migration and FDI could reshape space and place in the V4, which lost 10 million people since 2004 and suffering from labour shortage due to international migration.

Zsuzsanna Zsibók (p)

Gabor Lados

New economic challenges were brought in the 2020s by the pandemic crisis, and the subsequent geopolitical and energy crisis which highlighted the vulnerability of the growth model of national and regional economies in CEE countries. The early-2020’s crises marked the end of an economic era and some basic economic conditions have permanently changed, including the monetary environment (higher inflation and interest rates) and governmental indebtedness. Demographic challenges, including population ageing and skilled labour migration from East to West makes labour markets tight, especially in CEE countries. As a consequence, the extensive increase of labour supply can no longer be a source of economic growth. Both labour and raw materials have become scarce and expensive, but, unfortunately, the growth model followed by CEE countries has led to specialisation in economic sectors that are highly dependent on these resources. In order to bring these economies onto a sustainable growth path, more emphasis should be placed on the intensive growth, i.e., the increase of labour productivity, together with increasing domestic value added of production. CEE countries feature a dual economic structure with a large gap between the performance of domestic and multinational, SME and large firms. In order for FDI-dominated sectors to make a lasting contribution to economic catching-up, it is necessary to increase the share of domestic suppliers, to move up the value chains and to attract higher value-added activities.
The aim of the research is twofold: first, we investigate the changes of economic structure in CEE countries in a comparative manner at the sub-national (NUTS3) level over the period after 2010 with the help of exploratory statistics. Second, we investigate the relationship between FDI and labour productivity change in a regional disaggregation. Labour productivity changes are decomposed with the help of the shift-share method to a structural change effect and a within-sector growth effect. Our results indicate that the within-sector effect was considerably larger than the structural change effect which highlights the fact that there is a need to rethink the economic specialisation of the regions and the national economies. This will help these countries move away from the low road of development.

Stefan Apostol, Zoltan Gal (p)

This study examines the paradoxical effects of Global Value Chain (GVC) integration on economic, technological, and business complexities in Central and Eastern Europe (CEE) using the EMIS dataset from 2000 to 2020. While our analysis confirms a positive correlation between GVC integration measured by the GVC participation index and overall economic complexity, it reveals a divergent trend in technological and business domains. Despite deep GVC integration, CEE countries exhibit limited growth in technological innovation (measured by patents) and domestic business complexity (characterized by domestic firm dynamics). The ratio of forward to backward linkages, coupled with lower domestic value added, remains a challenge in Central and Eastern European Countries (CEECs), despite their higher economic complexity. In addition to these challenges, our study identifies two critical factors contributing to the observed disparities. Firstly, the mismatch in skills and capabilities of the local workforce in routinous assembly activities hinders the full utilization of GVC benefits, particularly in fostering technological advancements. Secondly, institutional factors, including regulatory frameworks and access to financing, play a pivotal role in shaping the business landscape and influencing the extent to which GVC integration translates into local economic development.
The study employs a spatial analysis approach, integrated with quantitative data analysis to uncover the underlying mechanisms of this disparity. Our findings suggest that external integration through GVCs may not suffice for fostering local technological advancements and a diverse business ecosystem. As it broadens economic complexity, it may not directly translate into local technological innovation or diversified domestic business landscapes. We discuss policy implications, emphasizing the need for targeted strategies to bridge these gaps, fostering a more holistic and internally robust economic development in the CEE region.