services may have negative impacts on the home economy. Because the latter generally accounts for a
minor portion of total FDI the net impact on the domestic economy is likely to be positive. For this
conclusion he provides evidence from the published literature and a broad array of analytical arguments.
The empirical literature provides several studies which investigate scope, structure and motives of
Western FDI in Eastern Europe on a regional level (BORSOS, 1995 for the Finish-Baltic region; for the
Greek-Bulgarian-Albanian region see PETRAKOS, 1996; for the German-Polish-Czech region see
VINCENTZ, 1995; for the Austrian-Slovakian region see ALTZINGER, et. al., 1998). All these studies
report the predominance of market driven FDI. The conclusion of Petrakos report e.g. is as follows: „For
Greece ... capital outflows are associated in most cases with an expansion (and not dislocation) of
activities to new markets that are easier to get in than the hard to compete and congested Western
European ones (PETRAKOS, 1996, 95).„ BORSOS’ conclusion is quite similar. The main reasons for
Finnish FDIs in the Eastern Baltic Rim are market-related. Factors such as low cost production, cheap
resources or investment incentives fall much further down the list of priorities (see BORSOS, 1995, 85).
By application of Dunning’s theory on international production even a more recent study on FDI in
Poland discards the suggestion that low cost labour production is the predominant determinant of FDI
(FLOYD, 1996). MEYER (1995) tested several hypotheses on questionnaire evidence of British and
German companies. His conclusion is that labour costs differentials did not induce major investment
flows.
The OECD (1994) and the EBRD (1994) have published studies on motives of FDI in the CEECs earlier.
Even these studies have challenged the ‘low wage-assumption’ considerably. The general conclusion of
the EBRD study was straightforward: „Most striking perhaps is the predominance of market access
among factors of importance to investor decisions. . Factor cost advantages are clearly rated as less
important than market access in all the surveys . Most studies explicitly play down the role of cheap
labour (EBRD, 1994, 132)„. The results of the OECD study (1994, Table 4) are very similar. The key
motive for FDI was to gain market access (44%) and labour costs were of secondary importance only
(9%). However, the same study shows that the shares of Austria’s FDI in the CEECs have been
reasonably different.3 Austrian enterprises rated market access with 35% and low cost production with
6%. Moreover, it is of particular interest that the motive ‘geographical location’ was rated rather high by
Austrian investors. On average this factor was rated as prime reason by 6% of all conducted enterprises
only. Conversely, Austrian enterprises have ranked this factor with 21% as an important reason for
investment!
This geographical factor seems to be closely related to the size of the investing enterprises. Both
VINCENTZ (1995, 112) and KURZ and WITTKE (1997, 20) argue that ‘low wage’ options are more
important for small and medium-sized enterprises (SMEs) than for large MNEs. Hence in particular these
enterprises have tried to make use of the new business opportunities in the CEECs. According to KURZ
and WITTKE (1997) this is mainly the case if spatial proximity is of relevance. Spatial proximity
reduces not only the time, risk and cost of transportation routes, moreover it enables Western companies
to minimise risks of managing cross-national production networks without transferring managerial or
engineering staff permanently to the East. These aspects are of particular importance for companies
without experience of internationalisation, which in many cases is true for SME. At least for two EU
members which are adjacent to the CEECs (Finland, Germany) there is empirical evidence which
indicates that SMEs are engaged in FDI activities to a considerable larger extent than before 1989 (for