The Contribution of Foreign Direct Investments to the Convergence of Regions in the Czech Republic

Abstract: The debate about the economic impact of multinational firms on a host country has been taking place for many years. Part of this discussion involves the effect of foreign direct investment (FDI) on the unemployment rate and economic growth. Analysis of FDI development, unemployment rate and the real domestic product (GDP) was carried out within the regions of the Czech Republic over the last decade. Comparative method and correlation analysis was applied to investigate the degree of dependence between the FDI level and the convergence of the poorer regions towards the more developed ones in terms of the examined characteristics. Results of the comparative analysis indicate that the effect of FDI on unemployment and GDP is insignificant. Statistical dependence between foreign investment inflow and economic growth has not been demonstrated; neither has the correlation between FDI and unemployment been proved. Insensitivity of the monitored variables on FDI development can be regarded as a serious problem for the “effectiveness” of this type of incentive policy.