Purpose – The purpose of this paper is to examine the potential impact of the 2008 economic crisis on foreign direct investment (FDI), especially in the new member states of the European Union. Particular attention is paid to the activities of subsidiaries of multinational enterprises (MNE), which can follow different scenarios as a response to the crisis, including a reorganisation of their production systems, and a reduction or closure of activities. Design/methodology/approach – The analysis is grounded on various streams of literature, including international business studies and research on transition. Evidence is derived from UNCTAD data, interviews and desk research. The method of descriptive analysis has been followed, combined with theoretical insights, conceptual discussions and case study evidence. Findings – While the full magnitude and consequences of the crisis are yet to be extensively analysed, the authors' preliminary findings suggest that the response of MNE subsidiaries to the crisis hinges critically upon the type and the industry of such subsidiaries. Export platforms in automotive industries have been hardest hit. However, there are indications of the qualitative development of subsidiaries in other industries, despite the crisis, as well as growing attractiveness of new EU members FDI in services. Research limitations/implications – This paper is an explorative study on the impact of the crisis on subsidiaries. More academic research should be conducted to understand this phenomenon, especially when the full magnitude of the crisis can be assessed. Practical implications – The authors' analysis points at important policy implications. The authors challenge the view that rising economic nationalism would be the right answer to the problems created by corporate restructurings. Further, the authors advocate selective host government support to subsidiaries, especially aimed at retaining R&D departments and skilled workforce. Originality/value – So far, the global economic crisis has been analysed mostly in consultancy reports and in studies focusing on the macroeconomic impact. However, to the authors' knowledge, no academic study has examined the issue of MNE subsidiaries' responses to the crisis.
International Journal of Emerging Markets – Emerald Publishing
Published: Sep 27, 2011
Keywords: Foreign direct investment; Multinational companies; Subsidiaries; Subsidiary development; Economic conditions; Eastern Europe; Transition economies
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