Is Foreign Direct Investment a Determining Factor in the Comp ...

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Abstract

The Visegrad Group (V4) countries have attracted considerable foreign direct investment (FDI), which has helped them transform from centrally planned to market economies. FDI is considered to play a positive role and has several spillovers. The convergence process of V4 countries to developed economies would not have been possible without improving their competitiveness to succeed in the international markets. FDI is assumed to help economies become more competitive through the transfer of capital or technologies. However, FDI’s role in enhancing economic growth and exports, reducing unemployment, and increasing cost of production can negatively impact competitiveness. Therefore, this study aims to examine whether the FDI affects the competitiveness of V4 countries, as expressed by three indices: World Competitiveness Ranking, Global Competitiveness Index, and Index of Economic Freedom. The analysis was conducted using panel regressions with fixed effects. The results indicate that FDI may have a negative impact on the V4 countries’ competitiveness; however, more in-depth analysis is necessary to draw definitive conclusions. Therefore, this study concludes that there is no direct relationship between FDI inflows and the competitiveness of the V4 countries.