European integration and the dynamic process of investments and divestments of foreign TNCs in Greece

Purpose – The purpose of the paper is to analyse how European integration shapes the locational decisions of foreign transnational corporations (TNCs). Design/methodology/approach – The paper concentrates on foreign direct investment (FDI) in the European Union (EU) and highlight the case of Greece. The investigation is based on a wide original sample of 199 foreign industrial subsidiaries operating in Greece. In particular, the paper reveals the dynamic investment and divestment strategies of TNCs in the host economy, which have taken place in the context of the reduction of EU market fragmentation and barriers to entry. Findings – The empirical results suggest, that, in general, the participation of Greece in the EU has not increased the attractiveness of the country as a production base for TNCs. In fact, Greece did neither manage to attract considerable amounts of export oriented foreign investment nor did it receive much efficiency seeking FDI. Research limitations/implications – The findings show for the case of Greece that divestment strategies of TNCs play a crucial role in explaining FDI patterns. For extending the results to more general applications, further research on this topic is needed. Practical implications – The paper concludes that the integration of Greece into the EU has uncovered some structural deficits of the national economy. In addition, we identify some important locational weaknesses concerning the Greek ability to attract FDI. Thus, in order to stop divestment of foreign TNCs further reform efforts are necessary. These findings are of particular interest for public policy makers. Originality/value – To the best of the authors' knowledge this is the first study that jointly analyse the investment and divestment strategies of TNCs in the specific regional context of Greece and the EU. It draws on an original sample of 199 foreign enterprises operating in Greece.