Spatial diffusion of Asian direct investments in the northern European EU countries

Abstract

The first publications on the spatial diffusion of foreign direct investment (FDI) appeared in the 1970s-1990s. Since then, many of their provisions have been repeatedly criticised as outdated and inconsistent with empirical evidence of the current stage of globalisation. Previously, only examples of 'newcomers' to internationalisation were used to illustrate distinct phases in the expansion of transnational companies and their effort to first establish themselves in major economic centres, as the factor of gradually growing awareness of potential investors began to play an important role. This article aims to show the persistent character of FDI spatial diffusion patterns and their correlation with the existing hierarchy of cities. In our research, we used the example of Asian companies working in the Baltic states, Finland, Sweden and Denmark, newcomers to internationalisation, not affected by the 'neighbourhood effect', and contrasted them with Western European investors. We confirmed the validity of the hierarchical wavelike model of the FDI spatial diffusion with the dominance of metropolitan urban agglomerations. It was also found that mergers and acquisitions are dominant forms of FDI in developed countries. Their ascendancy leads both to a distortion of the geographical pattern of subsidiaries networks of investor companies and to the intention of investors to sell their assets in provinces and move their head offices closer to capital cities. Consequently, there is a simplification of the structure of businesses, which is typical of the earlier stages of the FDI spatial diffusion.