An Analysis of the Life Cycle of Foreign Affiliates in a Small Open Economy: The Case of Greece 1960-2010 (Published)
The intellectual aspiration of the paper is to highlight the evolution of MNE activity in the Greek economy during the 1960-2010 period, using as intellectual analytical tools theories of FDI such as the Investment Development Path and New Institutional Economics apparatus. By imposing a time dichotomy in two sub-periods (1960-1980) and (1981-2010) we point out that in the first period, the economic environment was characterized by low wages, trade protection with tariffs and quotas, thus this period is the period of protectionism. During this early period, foreign MNEs had penetrated the Greek market with resource seeking (RS) and tariff-jumping (TJ) affiliates.
In the second period, which is the period of integration, the economic traits have changed. Thus infrastructure has been improved, wages have risen, trade barriers were gradually perished, and Greek firms started to engage in advertising and marketing and created their own branded products. This period has three sub-periods (1981-1990, 1991-2000, 2001-2010). During these sub-periods foreign MNEs, gradually but steadily reduce the number of RS and TJ affiliates and replace them with new market seeking (NMS) Greenfield affiliates stemmed from TJ units and acquisitions. We also highlight, that throughout the period although the total volume of FDI increased in absolute numbers, in relative terms (i.e. viz. a viz. other states), Greece failed to attract massive FDI inflows for a variety of reasons. Thus this research is associated with the evolution of FDI in a small open economy, its specific forms and with the survival of foreign plants. We have applied descriptive statistical methods and we have found out that in the 1960-2010 period foreign investments in Greece have been transformed. Thus in the early period (1960-1980) foreign MNEs prefer to engage in resource-seeking and tariff jumping investments, where as in the second period (1981-2010) foreign multinationals invest in new market seeking Greenfield affiliates. These results for the case of the Greek economy are reported for the first time. Furthermore, these results can be used as a specific case study of the evolution of a small and increasingly integrated open economy.