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Multinational enterprise strategy, foreign direct investment and economic development: the case of the Hungarian banking industry

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  • Akbar, Yusaf H.
  • McBride, J. Brad

Abstract

This paper examines foreign direct investment (FDI) in the Hungarian economy in the period of post-Communist transition since 1989. Hungary took a quite aggressive approach in welcoming foreign investment during this period and as a result had the highest per capita FDI in the region as of 2001. We discuss the impact of FDI in terms of strategic intent, i.e., market serving and resource seeking FDI. The effect of these two kinds of FDI is contrasted by examining the impact of resource seeking FDI in manufacturing sectors and market serving FDI in service industries. In the case of transition economies, we argue that due to the strategic intent, resource seeking FDI can imply a short-term impact on economic development whereas market serving FDI strategically implies a long-term presence with increased benefits for the economic development of a transition economy. Our focus is that of market serving FDI in the Hungarian banking sector, which has brought improved service and products to multinational and Hungarian firms. This has been accompanied by the introduction of innovative financial products to the Hungarian consumer, in particular consumer credit including mortgage financing. However, the latter remains an underserved segment with much growth potential. For public policy in Hungary and other transition economies, we conclude that policymakers should consider the strategic intent of FDI in order to maximize its benefits in their economies.

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  • Akbar, Yusaf H. & McBride, J. Brad, 2004. "Multinational enterprise strategy, foreign direct investment and economic development: the case of the Hungarian banking industry," Journal of World Business, Elsevier, vol. 39(1), pages 89-105, February.
    • Handle: RePEc:eee:worbus:v:39:y:2004:i:1:p:89-105
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    2. Barnard, H. & Cowan, R. & Müller, M., 2012. "Global excellence at the expense of local diffusion, or a bridge between two worlds? Research in science and technology in the developing world," Research Policy, Elsevier, vol. 41(4), pages 756-769.
    3. Dörrenbächer, Christoph & Gammelgaard, Jens, 2010. "Multinational corporations, inter-organizational networks and subsidiary charter removals," Journal of World Business, Elsevier, vol. 45(3), pages 206-216, July.
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    5. Fernandes, Ana M. & Paunov, Caroline, 2008. "Foreign direct investment in services and manufacturing productivity growth: evidence for Chile," Policy Research Working Paper Series 4730, The World Bank.
    6. Hemant Merchant & Ajai Gaur, 2008. "Opening the ‘Non-Manufacturing’ envelope: The next big enterprise for international business research," Management International Review, Springer, vol. 48(4), pages 379-396, April.
    7. Yusaf H. Akbar & Sonia Ferencikova, 2007. "Industrial Clustering and Global Value Chains in Central and Eastern Europe: Role of Multinational Enterprises in Industrial Upgrading," Prague Economic Papers, Prague University of Economics and Business, vol. 2007(3), pages 237-251.
    8. Dimitratos, Pavlos & Liouka, Ioanna & Young, Stephen, 2009. "Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK," Journal of World Business, Elsevier, vol. 44(2), pages 180-191, April.
    9. Chaohai Shen & Tong Sheng & Xingheng Shi & Bingquan Fang & Xiaoqian Lu & Xiaolan Zhou, 2022. "The Relationship between Housing Price, Teacher Salary Improvement, and Sustainable Regional Economic Development," Land, MDPI, vol. 11(12), pages 1-21, December.
    10. Petrou, Andreas, 2007. "Multinational banks from developing versus developed countries: Competing in the same arena?," Journal of International Management, Elsevier, vol. 13(3), pages 376-397, September.
    11. Cazzavillan, Guido & Olszewski, Krzysztof, 2012. "Interaction between foreign financial services and foreign direct investment in Transition Economies: An empirical analysis with focus on the manufacturing sector," Research in Economics, Elsevier, vol. 66(4), pages 305-319.
    12. Xiaohui Yuan & Jiayan Yan, 2022. "Reverse Efficiency Spillovers from Host Country Banks to Foreign Banks: Evidence from Emerging Market Bank Subsidiaries in Developed Markets," Management International Review, Springer, vol. 62(6), pages 915-946, December.
    13. Adisa Bala & Andrea Koxhaj, 2018. "Fiscal Decentralization as an Instrument for Economic Development of Local Government in Albania," European Journal of Marketing and Economics Articles, Revistia Research and Publishing, vol. 1, January -.
    14. Jiang, Mingrui & Luo, Sumei & Zhou, Guangyou, 2020. "Financial development, OFDI spillovers and upgrading of industrial structure," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
    15. Justin Paul & Gurmeet Singh, 2017. "The 45 years of foreign direct investment research: Approaches, advances and analytical areas," The World Economy, Wiley Blackwell, vol. 40(11), pages 2512-2527, November.
    16. Barnard, Helena & Cowan, Robin & Muller, Moritz, 2010. "Global excellence at the expense of local relevance, or a bridge between two worlds? Research in science and technology in the developing world," MERIT Working Papers 2010-051, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    17. Lee, Joong-Woo & Song, Hong Sun & Kwak, Jooyoung, 2014. "Internationalization of Korean banks during crises: The network view of learning and commitment," International Business Review, Elsevier, vol. 23(6), pages 1040-1048.

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