Structure and objectives of Austria's foreign direct investment in the four adjacent Central and Eastern European countries Hungary, the Czech Republic, Slovenia and Slovakia

providing their goods and services.

Once again it is useful to separate the motives of investment into ‘supply-based driven’ and ‘market-
driven’ ones. Presumably the first one would indicate that the dominant factor of investment is to get
access to a cheap industrial workforce. As long as the national purchasing power of the host country
remains low - which is a necessary requirement of this approach - a large part of the production will be
exported to developed countries with strong demand. As discussed in section 2, such a scenario would
presumably substitute exports from the home country and encourage reimports to the home country. Such
patterns are usually associated with ‘relocation’.

In contrast to this approach is the market-driven approach. Such a strategy would require a rather quick
development of the host economy. This would be accompanied by a considerable expansion of customer
demand. Therefore the production of the affiliates should be sold to a large extent on local markets. Such
a scenario is likely to stimulate ‘associated exports’ from the home country and hence would have a
positive impact on the domestic economy.

Table 4 shows the regional sales structure of the affiliates. Again, these are results of a survey. The
breakdown by industries is in accordance with the standard NACE-classification. The various industries
are ranged in descending order by the importance of the local market.

Table 4: Regional sales structure of the affiliates, 1995 (in%)

Source: Questionnare conducted in summer 1997

On average 65.8% of the total production of the affiliates was sold at local markets. One third of total
production was sold to foreign markets. 23.6% was exported to the EU, thereof 10.8% to Austria; another

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