Local determinants of foreign direct investment in Poland: the role of relative distance

Abstract

Research background: The increasing role of foreign direct investments (FDI) in global, national, regional, and local economies draws the public’s attention to the criteria utilised by foreign investors in undertaking locational decisions, owing to the mostly stimulating character of these kinds of investments.  Purpose of the article: The aim of the article is to identify the local determinants of FDI distribution. Particular attention is put on the role of distance to: (i) various transport endowments; (ii) next special economic zone; (iii) different national borders, among other motives studied in empirical papers. Methods: An important value added over the existing studies is the use of continuous variables representing distances (in km) to selected points of interest (e.g., airport) or minimum distances to lines (i.e., border, road) instead of dummy variables indicating whether particular infrastructure endowment is present in a region. The estimations were run in STATA 14.2 software with the use of a negative binomial approach. Findings & Value added: The results present new empirical evidence on FDI determinants witnessed at a local level of analysis (LAU 1), fitting into the other research done at a higher level of data aggregation (NUTS 2, NUTS 3), signalling high intra-regional inequalities and the role of: (i) relative distance to various infrastructure endowments; (ii) heterogeneous border effects; and (iii) the importance of close proximity to special economic zones. Given the presence of counties’ auto selection process (i.e., better developed, endowed, urbanised, favourably located) done by FDI investors, we formulate universal implications in terms of FDI promotion policy.