Emerging multinationals: the case of Hungary

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Emerging multinationals the case of Hungary

• Katalin Antalóczy, Finance Research Ltd.,
  Budapest, Hungary
• Magdolna Sass, Institute of Economics of HAS,
  Budapest, Hungary

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Hungary as a leading outward investor among
Visegrad countries

• Graph 1 FDI outward stock (USD millions)

• Graph 2 FDI outward stock per capita (2006, USD)

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Host country and sector distribution of Hungarian
OFDI

• Graph 4 FDI outward stock by sector (Millions of
  Euro)

• Graph 3 FDI outward stock by countries, 2005 ()

• Graph 5 FDI outward stock in manufacturing by
  sector

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Analysis of OFDI from Hungary

• Why is OFDI from Hungary so high in Visegrad/NMS
  comparison? Explanations in theory? (IDP, OLI)
• Methodology because of the very concentrated
  nature of Hungarian OFDI (few big companies)
  company level investigation, based on detailed
  company case studies
• Groups of companies investing abroad distinctive
  features based on these 4 company groups
  (mainly based on Aykut and Goldstein, 2006)

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Comparison of the 4 groups of companies investing
abroad 1
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Comparison of the 4 groups of companies investing
abroad 2
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Main findings 1

• Group 1 and 2 (indirect OFDI)
• At least 2/3 of total OFDI from Hungary connected
  to Group 2 (MOL, OTP, Richter, Danubius),
  formerly state owned companies privatised in the
  stock exchange with dispersed ownership (high
  foreign share) and thus the management acting as
  controlling owner
• Firm specific advantages important (OA)
• push factor OFDI a mean for them to
  strengthen their position reason for expanding
• pull factor capability of expanding
  interntionally successfully 1. organisational
  and management advantages in privatising former
  SOEs in their (or related) sector and
  restructuring them, helped by specific knowledge,
  familiarity 2. capital for expansion available
  due to (former) quasi monopoly position in the
  domestic market (or at least in some niches)
• Distinction in the literature (e.g. Altzinger et
  al, 2003 Svetlicic and Jaklic, 2006) and related
  conclusion about the dominance of indirect FDI
  from Hungary not acceptable, real indirect FDI
  (Group 1) is maximum 15 of total Hungarian
  OFDI
• Group 2 can be called virtual indirect OFDI,
  where the controlling owner is not foreign

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MOL shareholder structure (30 June, 2008)
Source MOL Plc
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Main findings 2

• Group 3 and 4 (direct FDI) more similar than
  Groups 1 and 2
• Around 20-25 of total Hungarian OFDI
• Medium-big and small sized investors
  distinguished, differing mainly in their
  geographic targets (Group 4 to closer
  destinations), motivation (Group 3 more
  efficiency seeking), and entry modes, mainly as a
  consequence of their financial strength and means
• Relocation from Hungary (not disinvestment)
  mainly Group 3

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Concluding questions for further research

• Importance examining former transition economies
  they basically start from zero in terms of FDI
  and OFDI.
• What is the impact of privatisation methods on
  OFDI in former transition economies?
• The paradox of expanding for escaping
  acquisition, but thus becoming an even more
  attractive acquisition target. (E.g. management
  controlled Hungarian companies introduced on the
  stock exchange and later acquired Zalakerámia,
  TVK, Pannonplast, Borsodchem)
• More general questions, requiring country
  comparisons
• Difference between EMNEs according to their
  ownerhsip structure/controlling owner
• Difference between regional and global EMNEs.

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Thank you for your attention!