New Patterns of Foreign Direct Investments Indirect Internationalisations of MNCs Using Platform Countries

Abstract

Since the fall of the Soviet Union in 1989, the former communist countries have been in a period of transition towards a market economy. The Central and East European countries have, however, developed to different extents. Several of the most transitionally advanced countries are situated in Central Europe whereas a number of the less successful countries are situated in Eastern Europe. As a result of this they attract different degrees of foreign investments. Several foreign companies choose to establish in countries that are considered as top performers when it comes to development. These companies then serve neighbouring countries that possess a more risky environment, from this base. Consequently, the country in which the company chooses to establish is used as a platform for further expansion.

The purpose of this study is to describe and explain the way Swedish owned MNCs expand into Eastern Europe via a subsidiary in Central Europe and to explain the reasons for, as well as well as difficulties with, this decision. Moreover, the benefits of this kind of strategy are also described. The main focus is on Hungary and Romania. In order to be able to fulfil this purpose, a number of Swedish owned subsidiaries in Hungary and their activities in the Romanian market have been investigated.

In this thesis, it is demonstrated that several Swedish owned MNCs establish in Hungary and then grow gradually but considerably in this market. Consequently, knowledge and experience about the Hungarian market as well as the neighbouring markets is then accumulated. As a result of this, the risk of, as in this case, the Romanian market entry is greatly diminished.