Does Local Technology Matter for Foreign Investors in Central and Eastern Europe? Evidence from the IWH FDI Micro Database

This article analyzes investment motives, scope, and intensity of R&D and innovation, in foreign affiliates and the extent and determinants of linkages to the host country's scientific institutions. The analysis uses the IWH FDI micro database that offers evidence for 809 foreign affiliates in Central and East Europe. Foreign direct investment into the region seems to be still dominated by marketand efficiency-seeking motives. Tapping into localized knowledge, skills, and technology seems to be of secondary importance. Yet, the majority of foreign affiliates actively engage in R&D and innovation, although fewer foreign firms build technological linkages with local scientific institutions.