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Five Years of an Enlarged EU pp 33–53Cite as

FDI Spillovers in the Czech Republic: Takeovers Versus Greenfields

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Abstract

This contribution analyzes the effects of foreign direct investment on the sales growth rate of domestic companies in the Czech Republic. Using firm-level panel data from 1995 to 2005, it studies both horizontal and vertical spillovers with respect to two kinds of foreign investment – takeovers and greenfields. This is the first paper applying this framework on firm level. The study allows also for the lagged nature of these spillovers. The results suggest that the sales growth rates of domestic companies mostly decrease in the presence of foreign companies, especially in upstream sectors. The impact through horizontal spillovers is mixed – positive from foreign takeovers, negative from greenfields. Positive forward spillovers are present mainly in recent years. Time sensitivity is revealed for horizontal as well as vertical spillovers.

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Notes

  1. 1.

    Bulgaria, Czech Republic, Estonia, Hungary, Poland, Romania, Slovakia, and Slovenia.

  2. 2.

    We interpret a company as foreign if it has at least 10% of its equity owned by a foreign investor. The same threshold is also used in the Czech National Bank official definition of FDI and in Damijan et al. (2003b), Javorcik (2004), and Stančík (2007).

  3. 3.

    Amadeus is a pan-European financial database.

  4. 4.

    A relation is a time series of the flow of goods and services from sector X to sector Y for the whole period 1995–2005. There are almost 7,000 such relations – for every combination of sectors X and Y, as well as for the supply and demand relationship. These relations are used to generate a mean value and standard deviation for every time series.

  5. 5.

    All of these procedures are described in the Annex.

  6. 6.

    At 2-digit NACE classification (Classification of Economic Activities in the European Community).

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Acknowledgments

I would like to thank Štěpán Jurajda and Peter Katuščák for valuable consultations on this research, and Jan Hanousek and Evžen Kočenda for providing data and useful comments. Financial support from GAČR grant No. 402/06/1293 is gratefully acknowledged.

Author information

Authors and Affiliations

  1. Center for Economic Research and Graduate Education, Charles University, Prague, Czech Republic

    Juraj Stančík

Authors
  1. Juraj Stančík
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Corresponding author

Correspondence to Juraj Stančík .

Editor information

Editors and Affiliations

  1. , ECFIN.E.2 - BU1 -1/10, European Commission, Brussels, 1049, Belgium

    Filip Keereman

  2. , ECFIN.A - BU-1 03/209, European Commission, Brussels, 1049, Belgium

    Istvan Szekely

Annex: Data Cleaning Procedure

Annex: Data Cleaning Procedure

Starting with the original data set we perform the following procedures:

  1. (a)

    Sales, fixed assets, staff costs

    • Observations other than from December 31 are dropped.

    • If there are more observations (from various accounting systems) for the same company and year, we use only the one from the most frequent accounting system.

    • Missing values are replaced by interpolated values.

  2. (b)

    Ownership structure

    • The sum of weighted averages, according to the number of reported days out of 365, of all owners within a year is used for creating a company’s ownership structure. This structure after wards includes the share of foreign as well as domestic capital for each company in each particular year.

    • When in two consecutive years (t and t+1) the share of domestic capital does not change and the value of the share of foreign capital in time t is missing, then this missing value is replaced with the value of foreign share from time t + 1.

    • We also assume the foreign share to be non-decreasing which al lows considering a company as foreign also in the next year even in absence of ownership structure information once it is found to be foreign in any previous year with a known ownership structure.

    • Observations from the years 1993 and 1994 are dropped due to missing ownership information.

    • Observations from the year 2006 are dropped as well because they are recorded only till June 30, 2006.

  3. (c)

    Cleaning of variables

    • Companies with only 1 year-observation are dropped since it is not possible to compute a growth rate for them.

    • Negative values of ownership shares are dropped.

    • If the sum of percentage ownerships of foreign and domestic owners is greater than 110%, the observation is dropped.

    • Sectors with a strong regulatory role of the government are dropped:

      • NACE-01 Agriculture, hunting and related service activities

      • NACE-02 Forestry, logging and related service activities

      • NACE-05 Fishing, fish farming and related service activities

      • NACE-40 Electricity, gas, steam and hot water supply

      • NACE-41 Collection, purification and distribution of water

      • NACE-75 Public administration & defence; compulsory social security

      • NACE-80 Education

      • NACE-85 Health and social work

See Tables 3.2 and 3.3

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Stančík, J. (2010). FDI Spillovers in the Czech Republic: Takeovers Versus Greenfields. In: Keereman, F., Szekely, I. (eds) Five Years of an Enlarged EU. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-12516-4_3

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  • DOI: https://doi.org/10.1007/978-3-642-12516-4_3

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-12515-7

  • Online ISBN: 978-3-642-12516-4

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