Still attractive for FDI? Location advantages of Visegrád countries in the digital era – the case of Poland and Hungary

Authors: Marta Götz, Andrea Éltető, Magdolna Sass

In: European Journal of International Management, 2023 Vol.20 No.1, pp.66 – 88

DOI: 10.1504/EJIM.2022.10054592

Abstract

The economic development of Central European countries has been based on foreign capital investments. Attracting FDI by influencing foreign investors’ decisions remained an important goal. Investment decisions are complex and affected by behavioural, subjective factors too. In this paper we investigate how digitalisation changes FDI decision making and what are the consequences for the location advantages of Poland and Hungary. We also aim to assess the reshoring prospects for these countries due to pandemic induced digitalisation and disruptions in global value chains. We have found that digitalisation changes the Dunning OLI paradigm advantages and influences the investment decision-making process. The location advantages of Poland and Hungary have not improved enough in modern digital technologies and have worsened in skilled labour supply. To compensate for these, attractive incentives are offered for foreign investors, which can maintain the momentum of FDI temporarily, but in the new era of Industry 4.0, government policy should invest more in digital skills and education.

Keywords: Poland, Hungary, I.40, digitalisation, attractiveness, FDI