INTERNATIONALIZATION OF FOREIGN-OWNED SUBSIDIARIES IN EASTERN EUROPE

Abstract

Since the fall of communism in the late 80’s Poland has taken major steps forward and become one of the most successful transition economies. One significant economic change is that trade has been re-oriented away from the CEE and CIS countries towards Western Europe as a result of a liberalization of the economy. However, trade relations with eastern neighbors are growing and becoming more important. A major role in these relations is played by foreign-owned subsidiaries based in Poland. This study sets out to explore how these subsidiaries have internationalized and what the underlying explanations as well as future prospects for such development are. The main purpose of the study, which is limited to investigating market entry into Ukraine, is to create an understanding for the internationalization of subsidiaries in Eastern Europe. The main findings of the study show that the mainly market-oriented subsidiaries were established rapidly in Poland through large capital investments, which made them into group regional centers. The subsequent expansion into Ukraine revealed that the subsidiaries operated in a gradual manner and by low commitment, because of various subsidiary internal factors and due to an insecure and volatile Ukrainian transition environment. To manage the business activities network relationships were used extensively. No common pattern was found as an explanation for the subsidiaries’ initial entry into Ukraine. Because of the slow developing character of the transition process subsidiaries are within the near future believed to continue expanding into Ukraine in the same way as they do at present.