The role of foreign direct investments (FDI) in establishing knowledge economy in the Czech Republic: the case of knowledge-intensive business services

Abstract

For the location of new activities in CEE, a helpful factor was sobering up of the European companies from the Indian euphoria. Because of different, lower-level property rights, difficulties in intercultural communication and, very often, only superficial knowledge of the topic, the companies stopped outsourcing of some more sensitive activities to India or China.

From the global point of view the “CEE miracle” is hard to compare with Asia, if in 2006 the CEE region received only a little more than $2B, in comparison to $386.5B worldwide (Třešňák 2007). But it brings new high-quality working places and highly embedded investments; additionally the multiplying effect is also much higher than in mounting factories activities. Outsourcing also supports motivation for education, world languages knowledge, travelling, and other positive phenomena. There are no or only very few risks. Who can be the competitor in the region? Economists do not suppose that the investment boom will stop in the near future. But Bulgaria, Romania, Ukraine, and maybe countries of former Yugoslavia are perceived as direct future competitors of the Vysehrad region. Despite the fact that we can observe a geographical trend towards selective concentration of these quaternary activities to big centres, especially metropolitan regions, and increasing polarisation between regions, positive effects for the country as a whole prevail. An important role of FDI localisation is played by the presence of technical universities and other „soft“ infrastructure. They do not bring the highest number of created jobs, but they are crucial in embedding other economic activities.