The role of local government units in attracting FDI. The case of the Lodz Region

The article focuses on the activities of local government units (LGUs) in the Lodz voivodeship (Poland). More importantly, it compares the activities of local authorities in selected EU Member States of Central and Eastern Europe. Despite the fact, that foreign investors consider Central and Eastern Europe one area, the countries in the region differ significantly with respect to economic achievements, foreign direct investment (FDI) absorption capacity, and the approach to investment incentives. In the literature some studies tried to identify some non-economic determinants of foreign direct investment. A consistent modelling of foreign direct investment flows needs to take account of not only the traditional determinants enumerated in literature, but also variables linked to the institutional environment, in which such investment takes place. Carlo Altomonte (2000) showed that an efficient institutional framework is a crucial determinant of foreign direct investment. That is why it is worth assessing whether the activities of regional authorities may contribute to an increased investment attractiveness of a region in the eyes of foreign investors. The aim is to evaluate local government’s efforts undertaken to attract FDI in view of a comparative analysis for regions in three countries: Hungary, Poland and Romania, and a direct research involving representatives of all counties and 36% of communes in the voivodeship of Lodz . The article centres around four aspects. First, it presents comparative analysis for selected Central and Eastern Europe (CEE) regions and it reviews instruments used by the LGUs to attract FDIs. Then, it provides the evaluation of communes and counties’ preferences when it comes to attracting FDIs. The third analysed aspect is the impact of FDIs on local economies. Finally, we also identify impediments to the inflow of FDIs to communes and counties. The paper was prepared on the basis of the results of a questionnaire survey, the literature of the subject, analysis of national and EU legislation, regional data from the Central Statistical Office and other institutions.