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Economic Transformation through the Lens of Economic Complexity: Estonia 1999-2010

Kuusk, Kadri LU (2013) EKHR71 20131
Department of Economic History
Abstract
After the breakup of the Soviet Union Estonian economy found itself cut off from its main markets and production links. One major barrier in the economic transformation and diversification process that followed was the lack of necessary tacit productive knowledge in the country. Furthermore, local firms had no or only weak links to the global production and knowledge networks that function as important sources of new knowledge. Foreign direct investments can serve as an alternative, fast track source for bringing new knowledge to the country. By combining the related variety and economic complexity concepts this thesis analyses the role of foreign investments in Estonia’s economic diversification and sophistication process. The study... (More)
After the breakup of the Soviet Union Estonian economy found itself cut off from its main markets and production links. One major barrier in the economic transformation and diversification process that followed was the lack of necessary tacit productive knowledge in the country. Furthermore, local firms had no or only weak links to the global production and knowledge networks that function as important sources of new knowledge. Foreign direct investments can serve as an alternative, fast track source for bringing new knowledge to the country. By combining the related variety and economic complexity concepts this thesis analyses the role of foreign investments in Estonia’s economic diversification and sophistication process. The study compares the relative novelty of products introduced to Estonian economy by domestic and foreign owned firms. The results do not support the hypothesis that foreign investments are relatively more important source of novel capabilities for the country than firms with only local owners. In case of Estonia, one explanation could be that foreign firms are attracted by cheap labour and the general capabilities of the country. Indeed many foreign investments were targeted to sub-contracting, which is less likely to introduce novel capabilities to the country’s productive system. Policymakers should distinguish between different types of foreign investors in their efforts of attracting and supporting foreign direct investments. Priority should be given to the investors introducing novel capabilities that could open up new development avenues that could build on country’s latent capabilities. (Less)
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author
Kuusk, Kadri LU
supervisor
organization
course
EKHR71 20131
year
type
H1 - Master's Degree (One Year)
subject
keywords
economic transformation, foreign direct investments, Estonia, economic complexity, related variety
language
English
id
7867398
date added to LUP
2015-11-30 12:23:42
date last changed
2015-11-30 12:23:42
@misc{7867398,
  abstract     = {After the breakup of the Soviet Union Estonian economy found itself cut off from its main markets and production links. One major barrier in the economic transformation and diversification process that followed was the lack of necessary tacit productive knowledge in the country. Furthermore, local firms had no or only weak links to the global production and knowledge networks that function as important sources of new knowledge. Foreign direct investments can serve as an alternative, fast track source for bringing new knowledge to the country. By combining the related variety and economic complexity concepts this thesis analyses the role of foreign investments in Estonia’s economic diversification and sophistication process. The study compares the relative novelty of products introduced to Estonian economy by domestic and foreign owned firms. The results do not support the hypothesis that foreign investments are relatively more important source of novel capabilities for the country than firms with only local owners. In case of Estonia, one explanation could be that foreign firms are attracted by cheap labour and the general capabilities of the country. Indeed many foreign investments were targeted to sub-contracting, which is less likely to introduce novel capabilities to the country’s productive system. Policymakers should distinguish between different types of foreign investors in their efforts of attracting and supporting foreign direct investments. Priority should be given to the investors introducing novel capabilities that could open up new development avenues that could build on country’s latent capabilities.},
  author       = {Kuusk, Kadri},
  keyword      = {economic transformation,foreign direct investments,Estonia,economic complexity,related variety},
  language     = {eng},
  note         = {Student Paper},
  title        = {Economic Transformation through the Lens of Economic Complexity: Estonia 1999-2010},
  year         = {2013},
}