Internationalization and Embeddedness in East-Central European Transition: The Contrasting Geographies of Inward Investment in the Czech and Slovak Republics

PAVLINEK P. and SMITH A. (1998) Internationalization and embeddedness in East-Central European transition: the contrasting geographies of inward investment in the Czech and Slovak Republics, Reg. Studies 32, 619-638. Inward investment has been accorded a central role in the internationalization and restructuring of East-Central European economies. This paper undertakes a critical examination of the capacity of inward investment projects in the Czech and Slovak Republics to generate forms of embedded regional restructuring. The analysis points to the profound, yet uneven and contradictory regional transformations resulting from inward investment in three industrial sectors in the Czech Republic and Slovakia: automobile manufacturing; light engineering; and tobacco and food processing. The paper also develops a number of conceptual arguments around the determinants of integrated and embedded inward investment. Wedraw upon two forms of regional restructuring to analyse how and why differential forms of embeddedness develop: 'defensive restructuring' through a focus on low wage, cost advantages and largescale worker flexibility; and 'offensive restructuring' in which there is a conservation and enrichment of skills, connected to high wages, an upgrading of productivity and important levels of co-operation and partnership between economic and institutional actors. We identify two main forms of transformation from an analysis of case study firms. First, we argue that forms of path dependent embeddedness are apparent when building upon former industrial strengths and traditions by an investor occurs, rather than their marginalization. In other words, where path dependent transformations of networks occurs, inward investment tends to have a more dynamic impact upon a region and does not result in the truncated industrialization of isolated FDI plants. We also argue that such forms of embeddedness are not without their significant costs …