Technology-intensive FDI and economic development in a small country – the case of Estonia
University of Tartu and the Institute of Baltic Studies
Abstract. This article reviews
industrialisation historic experiences aim ing at draw based ing th on lessons
for policy-making ese in in small countries .
The author modern world that introduction
foreign investment strategy is a one of the most in a
small country influential possibilities for a rapid
increase of the knowledge intensity of the
Estonian innovation policy Yet, similarly to most of the EU has ew
M tates S strongly undervalued the
power and role of such proactive strategies. The author calls for much better
focusing of the activities of foreign investment agencies and closer
co-ordination of strateg foreign investment with education, research,
employment and other policies. y
Keywords: foreign direct investment, R&D and innovation policy, economic development strategy, small countries, Estonia
Abramovitz, Moses (1956) “Resource and output trends in the United States since 1870”. American Economic Review 46, 5–23.
Abramovitz, Moses (1986) “Catching up, forging ahead, and falling behind”. Journal of Economic History 46, 2, 385–406.
ADO (2004) Asian development outlook 2004, Oxford University Press.
AFP (2004) “IMF tells Russia to focus on inflation, not growth”. Agence France Press, 17 November.
Akamatsu, Kaname (1935) “Waga kuni yomo kogyohin no susei”. [Trend of Japanese Trade in Woolen Goods], Shogyo Keizai Ronso 13, 129–212.
Barry, Frank (2002) EU Accession and FDI flows to CEE countries: Lessons from the Irish experience. University College Dublin.
BBC (2004) “Chinese firm buys IBM PC business”. BBC News, 8 December.
BBC (2005) “Rover sold to Nanjing Automobile”. BBC News, 23 July.
van Beers, Cees (2003) The role of foreign direct investment on small countries’ competitive and technological position. Government Institute of Economic Research, Helsinki, http://extranet.vatt.fi/knogg/Reports/t100.pdf
Berend, Ivan T. (1998) Decades of crisis: Central and Eastern Europe before World War II. Berkeley, Los Angeles & London: University of California Press.
BOE (2007) Position of direct investments by fields of activity. Bank of Estonia, http://www.eestipank.info
BRE (2005) Baltic Rim economies. Bimonthly review 2/2005, 28 April.
Briguglio, Lino Pascal (1998) Small country size and returns to scale in manufacturing world development 26, 3, 507–515.
Cooke, Philip (1992) “Regional innovation systems: competitive regulation in the new Europe”. Geoforum 23, 365–382.
Damijan, Joþe P. and Matija Rojec (2004) Foreign direct investment and the catching-up process in new EU member states: is there a flying geese pattern?. WIIW Research Reports 310.
DTI (2004) The 2004 R&D scoreboard. London: Department of Trade and Industry, http://www.dti.gov.uk
Dunning, John H. (2000) “The eclectic paradigm as an envelope for economic and business theories of MNE activity”. International Business Review 9, 163–190.
Dyker, David (2004) “Closing the productivity gap between eastern and western Europe: the role of foreign direct investment”. Science and Public Policy 31, 3, 279–287.
EC (2002) Innovation tomorrow. (Innovation Papers, 28.) Luxembourg: European Commission DG Enterprise, http://www.cordis.lu/innovation-policy/studies/gen_study7.htm
EC (2005) “Commission clears BenQ’s acquisition of Siemens mobile device business”. European Commission, IP/05/1107, 8 September.
Economist (2004) “The new jobs migration”. The Economist, 21 February.
Economist (2005) “The global housing boom: In come the waves”. The Economist, 16 June.
Einhorn, Bruce et al. (2005) “Why Taiwan matters”. BusinessWeek, 16 May.
Ernst, Dieter and Linsu Kim (2002) “Global production networks, knowledge diffusion, and local capability formation”. Research Policy 31, 8–9, 1417–1429.
Eurostat (2005) NewCrono. Eurostat, June.
Ewing, Jack and Dexter Roberts (2005) “The Chinese are coming…Tto Germany”. Business Week, 21 February.
FDI (2007) UNCTAD FDI Database, August.
Forfas (2005) International trade & investment report 2004. Forfas, Dublin.
Freeman, Chris (2002) “Continental, national and sub-national innovation systems: complementarity and economic growth”. Research Policy 31, 2, 191-211.
Galego, Aurora et al. (2004) “The CEEC as FDI attractors: a menace to the EU periphery?” Emerging Markets Finance and Trade 40, 5, 74–91.
Gerschenkron, Alexander (1962) Economic backwardness in historical perspective. Cambridge, Massachusetts: Harvard University Press.
GIPA (2004) Global investment prospects assessment. UNCTAD, http://www.unctad.org/fdiprospects
Graham, Edward M. and Paul R. Krugman (1993) “The surge in foreign direct investment in the 1980s”. In Foreign direct investment. Kenneth A. Froot, ed. Chicago: University of Chicago Press.
van Grunsven, Leo and Chris van Egeraat (1999) “Achievements of the industrial ‘high-road’ and clustering strategies in Singapore and their relevance to European peripheral economies”. European Planning Studies 7, 2.
Hemerling, Jim et al.(2003) Made in China. Boston Consulting Group.
Hunya, Gábor (2004a) “Manufacturing FDI in new EU member sates – foreign penetration and location sifts between 1998 and 2002”. WIIW Research Report 311.
Hunya, Gábor (2004b) “DI in small countries: the Baltic sates.” EIB papers 9, 2, 92–114.
IMF (1977) IMF Balance of payments manual, 4th ed. IMF.
Jin, Zhang (2004) “China becomes global ‘brain’”. China Daily, http://www2.chinadaily.com.cn/ english/doc/2004-04/13/content_322876.htm
Johansen, Harley (2000) “Nordic investments in the former Soviet Baltic frontier: a survey of firms and selected case studies,” Geografiska Annaler. Series B Human Geography 82, 4.
KBE (2007) Estonian research and development strategy 2007-2013. Knowledge-based Estonia. RTI 22 February, 16, 78.
Kelley, Charles et al. (2004), High-technology manufacturing and U.S. competitiveness. RAND Corporation.
Kojima, Kiyoshi (2000) “The ‘flying geese’ model of Asian economic development: origin, theoretical foundations, and regional policy implications”. Journal of Asian Economics 11, 375–401.
Lall, Sanjaya (2000) Export performance, technological upgrading and foreign direct investment strategies in the Asian newly industrializing economies. With special reference to Singapore. (ECLAC desarrollo productivo serie, 88.) United Nations.
Lall, Sanjaya (2002) “Linking FDI and technology development for capacity building and strategic competitiveness”. Transnational Corporations 11, 3, 39–88.
Lei, David (2007), “Outsourcing and China’s rising economic power”. Orbis 51, 1, 21–39.
Lemola, Tarmo (2003) “Transformation of the Finnish science and technology policy”. Science Studies 1, 52–67.
Lundvall, Bengt-Ake et al. (2002) “National systems of production, innovation and competence building”. Research Policy 31, 213–231.
Maddison, Angus (2001) The world economy. A millennial perspective. Paris: OECD.
Malairaja, Chandra and Girma Zawdie (2004) “The ‘Black Box’ syndrome in technology transfer and the challenge of innovation in developing countries: the case of international joint ventures in Malaysia”. International Journal of Technology Management and Sustainable Development 3, 3, 233–251.
Malerba, Franco (2002) Sectoral systems of innovation and production. Research Policy 31, 2, 247–264.
Mandelbaum, Kurt (1945) The industrialisation of backward areas. Oxford: Blackwell.
Mayhew, Alan (1998) Recreating Europe. The European Union’s policy towards central and eastern Europe. Cambridge University Press.
Nelson, Richard and Gavin Wright (1992) “The raise and fall of American technological leadership: the postwar era in historical perspective”. Journal of Economic Literature 30, 1931–1964.
Nurkse, Ragnar (1953) Problems of capital formation in underdeveloped countries. Oxford: Oxford University Press.
O’Connor, Tom (2001) “Foreign direct investment and indigenous industry in Ireland: Review of evidence”. One Europe or Several? One-Europe Programme. Working Papers 22.
OECD (1999) Managing national innovation systems. Paris: OECD.
OECD (2005)Governance of innovation systems. Vol. 1: Synthesis Report. Paris: OECD.
Owen, Thomas C. (1985) “The Russian industrial society and tsarist economic policy, 1867–1905”. Journal of Economic History 45, 3, 1985.
Pérez, Carlota (2001) “Technological change and opportunities for development as a moving target,” CEPAL Review 75, 109–130.
Pérez, Carlota (2002) Technological revolutions and financial capital: the dynamics of bubbles and golden ages. Cheltenham - Northampton, MA: Edward Elgar Publishing.
Porter, Michael E. (1990) The competitive advantage of nations. London: Macmillan.
Prebisch, Raúl (1959) “Commercial policy in the underdeveloped countries”. American Economic Review. Papers and Proceedings 49, 251–273.
Ricardo, David (1817) The principles of political economy and taxation. London: John Murray, Albemarle-Street.
Shin, Jang-Sup (2005) “The role of the state in increasingly globalized economy: implications for Singapore”. The Singapore Economic Review 50, 1, 1–13.
Singer, Hans W. (1959) “The distribution of gains between investing and borrowing countries”. American Economic Review. Papers and Proceedings 40, 473–485.
Solow, Robert (1957) “Technical change and the aggregate production function”. Review of Economic Studies 39, 312–330.
Tiits, Marek et al. (2005) Made in Estonia. Tartu: Institute of Baltic Studies.
Tiits, Marek (2006) Industrial and trade dynamics in the Baltic Sea region – the last two waves of European Union enlargement from a historic perspective. Institute of Baltic Studies, Working Paper 1.
Tiits, Marek, ed. (2007) Kaupmeeste riik. [The nation of merchants.] Tallinn: Estonian Academy of Sciences.
UNCTAD (2005) New UNCTAD surveys: foreign direct investment prospects promising for 2005-2008. UNCTAD Press Release, 5 September.
UNCTAD (2006) World investment report 2006. New York and Geneva: UNCTAD.
Vernon, Raymond (1966) “International investment and international trade in the product cycle”. The Quarterly Journal of Economics 80, 2, 190–207.
Varblane, Urmas, ed. (2001) Foreign direct investments in the Estonian economy, Tartu:University of Tartu Press.
Varblane, Urmas et al. (2003) Mechanisms of productivity growth through inward foreign direct investment: Estonia – country report. Faculty of Economics and Business Administration, University of Tartu.
de Vylder, Stefan (1996) The rise and fall of the “Swedish model”. UNDP Occasional Paper 26, http://hdr.undp.org/docs/publications/ocational_papers/oc26a.htm
Waddell, Kevin (2005) The central and eastern European opportunity: creating global advantage in serving Western Europe. Boston Consulting Group.
Walsh, Vivien (1987) Technology, competitiveness and the special problems of small countries. OECD. STI Review 81–133.
Wells, Louis (ed) (1972) The product life cycle and international trade. Boston: Harvard University.
WTO (2004) International trade statistics 2004. World Trade Organization, http://www.wto.org/english/res_e/statis_e/its2004_e/its04_toc_e.htm
von Zedtwitz, Maximilian and Oliver Gassmann (2002) “Market versus technology drive in R&D internationalization: four different patterns of managing research and development”. Research Policy 31, 569–588.