CEU Electronic Theses and Dissertations, 2014
| Author | Scepanovic, Vera |
|---|---|
| Title | FDI as a solution to the challenges of late development: catch-up without convergence? |
| Summary | This dissertation contributes to the literature of late development by examining in detail the solutions to key development challenges - capital, technology and labour productivity – that were constructed in East Central Europe (ECE) at the turn of the 21st century. I argue that these solutions are distinct from those familiar from the previous generations of late developing countries, so much so that they constitute a new variety of late development, which I call hyperintegratio nist. Hyper- integrationist development model is distinguished primarily by the centrality of the role of foreign capital, and the way it is incorporated in the response to development challenges. Contrary to the mainstream theories of FDI and development, which see FDI as a vehicle of transfer of technology and skills from foreign to local actors, I show that in the hyperintegrationist development model FDI does not advance the growth of the host country by helping to develop domestic capabilities, but by substituting them with external resources. This form of development also requires different arrangement to govern the relations between key actors: multinationals on the one hand, and local states, capital and labour on the other. The role of the state in particular changes from that of the facilitating transfers of technology and skills to local firms to attracting and directing the flows of foreign capital towards the most promising activities. States in the hyper-integrationist developers are more constrained by the international regulatory environment than their peers in other late development varieties, and in order to achieve their goals they are forced to draw on a more fragmented set of alliances, many of them transnational in nature. Although their commitment to international integration limits the range of tools they can use to impose performance targets on foreign companies, it can also occasionally provide them with some mechanisms to resist the more onerous demands on their part. Hyper-integrationist approach to development also carries a specific constellation of advantages and disadvantages. On the one hand, substitution of capabilities through transnational investment networks can lead to faster modernisation and increased export potential. Using the example of automotive industry, I show how the East Central European countries managed to achieve in record time the level of international competitiveness that is comparable to some of the most successful examples of late development in other regions of the world. On the other hand, the effects the local production factors have not been equally positive. For all its success in advancing external competitiveness, hyper-integrationist development model does not seem to have an internal mechanism for upgrading of skills or technology. Domestic firms have been all but eliminated from the competition, the demand for technology production remains low, and the region continues to rely on its low-cost advantage, with limited investments in workforce skills. This mismatch between catch up and convergence may not necessarily have a negative impact on the region’s performance in the medium term, so long as they continue to attract sufficient foreign investment. At the same time, however, it has already created some tensions within the model, especially between foreign investors and labour. The legitimacy of hyperintegrationist development in ECEs had been strongly linked to the promise of eventual convergence with more developed members of European Union. Despite all its achievements so far, a failure to deliver on these promises may yet turn into the main source of instability within the ECE’s hyper-integrationist development model. |
| Supervisor | Bohle, Dorothee |
| Department | Political Science PhD |
| Full text | https://www.etd.ceu.edu/2014/scepanovic_vera.pdf |
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