Impact of foreign direct investment on Croatian manufacturing exports

Abstract

The exports of Croatian manufacturing industry have been stagnating over the last decade or so. Over the same period there have been relatively high inflows of foreign direct investment (FDI) into industry. The aim of this paper is to examine, after con-trolling for other potentially significant variables, whether these inflows have had an impact on export performance. Using the panel data approach for 21 manufacturing industry sectors over the period between 1996 and 2002, it is found that FDI has positively and significantly affected exports, but the extent of this impact was relatively low. This implies that there is a potential for improving the export performance of Croatian manufacturing industry by attracting more FDI into this sector. Policy makers should try to enhance the potential positive effects of FDI by targeting specific export-oriented greenfield foreign investment, and, in addition, implement measures to increase potential spillover effects.