DIFFERENCES IN CONCENTRATION OF FOREIGN
DIRECT INVESTMENT IN RELATION TO POTENTIAL
OF REGIONS IN THE CZECH REPUBLIC
Ing. Petr Hlaváček, Ph.D.
Department of Regional Development and Public Administration
Faculty of Social and Economic Studies
Jan Evangelista Purkyně University in Ústí n. L.
THEORETICAL FRAMEWORK
The issue of location of transnational companies is mapped by many authors:
- Markusen (1994) points out that the prosperity of regions depends on
strategies of big companies making decisions based on characteristics of
regions on a global scale.
- Vernon (1966) explains why companies do not localise production by means of
standard factor-cost or labour-cost analyses, however, it is much more
complex. Production of a product will be transferred where the conditions for
its production are the most convenient.
- According to the eclectic paradigm of foreign direct investment (Dunning,
Narula, 1996), it is necessary to generate corresponding revenues from
realisation of foreign investment to make business in a foreign economy worth
it.
THEORETICAL FRAMEWORK
 It still applies, however, that foreign direct investments are necessary for
growth of the region’s competitiveness in the Czech Republic.
 There is some competition among the regions influenced by the fact that
the regions have a varied level of attractiveness for localising (Sucháček,
2013; Demel, Potužáková, 2012; Hlaváček, 2010), different conditions for
spillover effects and a regionally diversified development potential
(Viturka, 2014;Wokoun,Tvrdoň 2010; Žížalová, 2006).
 It is solely the direct relation between the influx of investment and regional
development processes that the analytical part of the article focuses on.
AIMS
 The aim of the article is to identify regional differences in concentration of
foreign investment with relation to other key socio-economic indicators.
 Exists spatial differentiation in regionally specific types of the territories,
e.g. urban versus rural regions ?
 Exists the influence of the geographical position at inflows of direct
foreign investment into regions in the Czech Republic.
METHODOLOGY
Indicator code period Source
FDI per capita FDIpc 2013 ČNB
Share of urban population
(%)
SUrbRate 2013 ČSÚ
Unemploymet rate (%) UNEM December
2013
ČSÚ
Economic Burden Index IEZ 2013 ČSÚ
Share of employment at
indulty/employment total
(%)
EIIND 2013 ČSÚ
To asses the differences between the concentration of foreign direct investment and regional
development at the level of districts, there is possible to use selected indicators replacing the
absence of data on gross domestic product, as this indicator is not published at the level of districts.
The first assessment criterion evaluated for relation was the rate of urbanisation at the level of
districts, which maps the relation between concentration of foreign direct investment and the
urban or rural character of the settlement. The conditions in the labour market are represented by
the unemployment rate as of December 2013 and the Economic Burden Index.
The last indicator was the share of the number of people employed in the industry.
RESULTS- STOCK OF FOREIGN DIRECT
INVESTMENT PER CAPITA (2013)
 Urban districts in general in metropolitan areas show
higher concentration of FDI.
 The level of districts is clearly dominated by the
metropolitan region of Prague, with a remarkably
higher concentration of direct foreign investment,
and the district of Mladá Boleslav.
 The importance of the geographical position of the
districts is connected with benefiting from closeness
of large towns, which has higher agglomeration
effects,
 a higher concentration of investment in the west.
 Except of region of KarlovyVary, which have a very
good geographical position, but with poor
concentration of direct foreign investment.
 Localisation of foreign investment in structurally
affected districts (MSK,UK) is also influenced by
public politics and investment incentives providing a
higher rate of government support for investment
localised in those districts.
RESULTS - RELATION OF INDICATORS
MONITORED ONTHE BASIS OFTHE
CORRELATION MATRIX
FDIpc IEZ UNEM SUrbRate EIIND
FDIpc
Pearson Correlation
1 .032 -.295** .272* -.159
Sig. (2-tailed) .782 .009 .017 .168
N 77 77 77 77 77
IEZ
Pearson Correlation
.032 1 -.492** -.025 -.326**
Sig. (2-tailed) .782 .000 .829 .004
N 77 77 77 77 77
UNEM
Pearson Correlation
-.295** -.492** 1 .283* .071
Sig. (2-tailed) .009 .000 .013 .539
N 77 77 77 77 77
SUrbRate
Pearson Correlation
.272* -.025 .283* 1 -.144
Sig. (2-tailed) .017 .829 .013 .213
N 77 77 77 77 77
EIIND
Pearson Correlation
-.159 -.326** .071 -.144 1
Sig. (2-tailed) .168 .004 .539 .213
N 77 77 77 77 77
-Results of the correlation matrix imply a
statistically significant inversion relation
between the concentration of foreign direct
investment and the unemployment rate.
-regions with a higher concentration of foreign
direct investment rather show a lower
unemployment rate.
-The statistically significant relation shows
positive relation to the level of urbanisation;
urban regions have a higher concentration of
foreign direct investment than rural regions.
This can also be caused by the fact that urban
regions show higher agglomeration effects,
and their labour market and infrastructure
including subcontractor relations are more
developed.
CONCLUSION
 In general, at the level of regions, in concentration of foreign direct investment,
metropolitan regions dominate over the other regions.
 Foreign direct investment is concentrated in regions with a higher economic level
or in more urbanised areas.
 These tendencies show long-term regional differences between the metropolitan
areas and the remaining parts of the country, especially in relation to rural areas
and peripheral territories.
 Other problem is with the poor presence of qualitative-oriented foreign direct
investment with connection to innovation and research and RIS, functioning of
technological centres and innovation business.
 For example, Ústí nad Labem district and Ústecký region have a relative higher
concentration of FDI, but they are not developed well in these parameters in
comparison to the other regions.
CONCLUSION
 Based on regional differences in the level of the monitored indicators and the
foreign investment influx to the Czech Republic, we cannot formulate clear
conclusions concerning the success or failure of the economic transformation.
 Concentration of foreign direct investment could be seen as criterion pointing out
the attractiveness of the region, especially in foreign investment with a higher
added value.
 Foreign direct investment shows a problem, which is expected to grow negatively
in the future, namely the growth of polarisation between urban regions and rural
and peripheral regions on the other side with lack of agglomeration effects.
Thank you for your attention.