Privatisations, FDI, and Greece’s regional economic recovery: an empirical study of perceptual view of investors

ABSTRACT

This paper aims to explore the perceptions of domestic and foreign entrepreneurs (businesspeople and/or managers) operating in Greece towards the spatial diffusion of FDI effects caused by the privatization programme implemented by the Greek government after an economic crisis. In particular, it investigates whether attracting foreign direct investors through the ongoing privatization programme could be a policy tool for the country's recovery from the prolonged 2008 global economic crisis. To that end, it presents the results of a multinomial logistic regression model based on survey data from a significant sample of domestic and foreign investors in Greece. The key finding of this study suggests that the positive effects of FDI on the recovery of Greece from the economic crisis are more likely to benefit the country's economy as a whole than only the local economy in which the FDI is located. This finding is stronger for entrepreneurs who are (moderately) optimistic about the role of the privatization programme in attracting the interest of foreign investors than others. Overall, there is evidence that FDI attraction policies can help all Greek regions to recover from an economic crisis.

KEYWORDS:

• FDI
• spatial diffusion
• economic crisis
• privatization programme
• Greece

JEL CLASSIFICATION:

• E60
• F23
• G01
• L33

Acknowledgements

The authors are grateful to Dr Panayiotis Manetos for his assistance in mapping of the data.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The ‘Support Mechanism’ consisted of the International Monetary Fund (IMF), the European Union (EU) and the European Central Bank (ECB).

2 Question on corruption: state your opinion on the influence of ‘Corruption’ in the establishment of an investment in Greece (1-7 Likert scale, 1 =  Not important, 7 =  Very important); and question on political stability: state your opinion on the influence of ‘Political stability’ on the establishment of an investment in Greece (1-7 Likert scale, 1 =  Not important, 7 =  Very important).

3 Question on sea access: direct access to the sea and the existence of a harbour were very important factors for the location of the investment (1-7 Likert scale, 1 =  Strongly disagree, 7 = Strongly agree); and question on natural resources: the existence of natural resources (e.g. soil and subsoil) has been a critical factor in selecting the location of the investment (1-7 Likert scale, 1 =  Strongly disagree, 7 = Strongly agree).

4 Question on the proximity to competitors: proximity of your company to similar/competitive companies has influenced the location choice of the investment (1-7 Likert scale, 1 =  Strongly disagree, 7 = Strongly agree); and question on country location: Greece’s location on the world map (i.e. Greece's proximity to the rest of the Balkan countries and the fact that it is a crossroads of three continents) was a determining factor in the location choice of the investment (1-7 Likert scale, 1 =  Strongly disagree, 7 = Strongly agree).

5 Question on the quality of infrastructure: State your opinion on the influence of ‘Quality of infrastructure’ on the establishment of an investment in Greece (1-7 Likert scale, 1 =  Not important, 7 =  Very important); and question on trade openness: State your opinion on the influence of ‘Trade openness’ on the establishment of an investment in Greece (1-7 Likert scale, 1 =  Not important, 7 =  Very important).

6 We used the regional controls at the NUTS 3 rather than the NUTS 2 level, because the NUTS 3 is the smallest spatial scale and thus we have larger spatial variation of the regional controls.