Boundless Expansion of Leading Hungarian Multinationals? – Hungarian Outward Investments in 2009-2011

Economic scholars, pundits and practitioners are becoming more and more aware of the fact that foreign direct investment can be ranked with one of the basic drivers of development through various channels (i.e. knowledge and technology transfers, triggers of R&D and innovation activities etc.). There is no gainsaying the fact that the relevance of FDI, let it be inflowing or outflowing, has gained even more substantial momentum with the intensified globalisation and integration of markets leading to knowledge (or learning) economies in the developed world. Plethora of studies emphasised that FDI in general has positive impetus on countries’ competitiveness via strengthening and improving productivity. However, as the European continent’s secular productivity trend suggests, it has not been in a benign position compared to that of the United States (See Gordon, 2012).
As a corollary, it seems that increasing FDI does not inevitably lead to improving productivity, the causal relationship is relatively weak as it was articulated clearly by Haskel et al. (2007) as well as Keller and Yeaple (2009). What is more, the study prepared by Kalemli-Ozcan et al. (2013) implies that even very large increases in FDI do not seem to be as important for country-level productivity growth as it was previously assumed.
Against this background, one can observe that trajectories in terms of outward FDI has been conveying a solid message that developing world as well as emerging markets show relatively fast rise by meaning that the classical view of FDI flow, which stated that it flows from developed nations to developing ones, does not apply any more with the same meaning.
Chart 1. Outward FDI (flows, annual, millions of USD)
Source: UNCTAD (2013)
Let us underscore that the New Member States of the European Union has also countries with a surpassing volume of outward FDI, like Hungary. Hungarian multinational enterprises (MNEs) have been operating quite pro-actively in international market-seeking processes also with the aim at exploring new markets with the necessary resources (oil, gas fields etc.).
Chart 2. Outward FDI in New Member States of the European Union
(1990-2012, million USD)
Source: UNCTAD (2013)
Our recent comprehensive study, written by Magdolna Sass and Olivér Kovács, sheds light on the outward looking behavior of the top 20 leading Hungarian multinationals (Sass – Kovács, 2013). As the study reveals, the 20 MNEs ranked held more than US$ 18 billion in foreign assets in 2011. A decreasing trend can be observed in terms of aggregated foreign asset over the period 2009-2011. In 2011, Hungary was the 22nd outward investor in terms of foreign direct investment (FDI) stock among emerging markets and the 17th largest in terms of outward FDI flows, well below the BRIC countries, but a large investor among the new member states of the European Union.
Gordon, R. J. (2012): Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds. NBER Working Paper No. 18315
Haskel, J. – Pereira, S. – Slaughter, M. (2007): Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?,” The Review of Economics and Statistics, Vol. 89., No. 3, pp. 482-496
Kalemli-Ozcan, S. – Fons-Rosen, C. – Sørensen, B. E. – Villegas-Sanchez, C. – Volosovych, V. (2013): Quantifying Productivity Gains from Foreign Investment. Tinbergen Institute Discussion Papers Vol. 58., No. 4, Tinbergen Institute.Keller, W. – Yeaple, S. (2009) Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the US,” The Review of Economics and Statistics, Vol. 91., No. 4, pp. 821-831
Sass, M. – Kovács, O. (2013): A Snapshot of the Leading Hungarian Multinationals 2011. ICEG European Center, Columbia University, Vale Columbia Center on Sustainable International Investment. Available: http://www.vcc.columbia.edu/content/snapshot-leading-hungarian-multinationals-2011-0 or http://icegec.hu/download/publications/research_report_icegec-emgp_2013.pdf Accessed on: 11.09.2013