Spatial polarisation within foreign trade and transnational firms networks. The Case of Central and Eastern Europe

Centre for Advanced Spatial Analysis, University College London, UMR 8504 Géographie-cités, Université Paris 1 Panthéon-Sorbonne
n.zdanowska@ucl.ac.uk

Abstract After the fall of the Berlin Wall, Central and Eastern Europe were subject to strong polarisation processes. This article proposes examines two neglected aspects regarding the transition period: a comparative static assessment of foreign trade since 1967 until 2012 and a city-centred analysis of transnational companies in 2013. Results show a growing economic differentiation between the North-West and South-East as well as a division between large metropolises and other cities. These findings may complement the targeting of specific regional strategies such as those conceived within the Cohesion policy of the European Union.

Keywords: economic specialisation, international trade, transnational companies, cities, Central and Eastern Europe Introduction
Globalisation is characterized by strong spatial and economic polarisation processes as well as competition to capture the most innovative technologies (Held McGrew Goldblatt et al. 1999; Greenstock 2007). Polarisation is ‘the attraction exerted by a place on a more or less extended and heterogeneous one that is in a situation of dependency with respect to this centre’ (Elissalde 2004, 1). The attraction of these ‘growth poles’ is a driving force of the development of a 2

regional whole, where selective investments are creating growth-multiplying mechanisms (Perroux 1955). Generally examined at the level of countries or regions (Krugman 1995), these effects can as well captured when considering cities as they are relevant actors of globalisation (Alderson and Beckfield 2004; Beaverstock et al. 1999; Derudder 2006; Sassen 1991; Taylor 2003). At the cross-over of the major international networks and flows (Rozenblat and Pumain 1993; Batty 2013), they are the major receptors of economic activity attracting transnational companies and foreign direct investments (Massey 2007; Berger 2005; Markusen 1994; Finance and Cottineau 2018; Zdanowska 2018).
The effect of globalisation processes can be particularly observed in the evolution of Central and Eastern European countries (CEEC) and cities (CEECc)1 economic specialisations. Central and Eastern Europe (CEE) integrated into the market economy in the early 1990s, when strong hierarchical forces were already active between cities in the rest of Europe and the world within the globalized markets (Rozenblat and Pumain 2007). The contribution of this article is to evaluate the effect of intensification of international trade and foreign ownership of firms’ capital on polarisation in CEE as a result of entering of CEEC and CEECc into the globalized processes of market economy. Studies have shown that at country level foreign trade is regarded as a source of economic growth and regional development (Makki and Somwaru 2004). The attraction of transnational companies in cities (Rozenblat and Pumain 2007) is an opportunity for redistribution of wealth in a country (Makki and Somwaru 2004; Amin and Thrift 1994; Andreff 1996). Additionally, economic specialisation in high-intensive technology and knowledge-based services is considered as the highest stage of integration in the globalisation processes and the global production networks (Krugman and Obstfeld 2000; Massey 2007; Finance and Cottineau 2018).

1 Understood as eight post-communist countries, members of the European Union (Bulgaria, Croatia, Czechia, Hungary, Poland, Romania, Slovakia, Slovenia). CEE will be used in the rest of the article as an abbreviation for Central and Eastern Europe, CEECs for Central and Eastern European countries 3

The economic transition post-1989 and accession of the CEECs to the European Union since 2004 have been major stimuli to intensification of foreign trade and capital flows into the CEE economies in the forms of foreign direct investment (FDI),2 portfolio investments and loans (Pyka 2011).
In spite of the general idea that inflow of FDI is an essential determinant of economic growth and a wealth and job generator (Barrell and Pain 1997; Olofsdotter 1998; Berger 2005; Chowdhury and Mavrotas 2006; Shi et al. 2018) the impact on the host countries can be variable. Some works have shown that it may contribute to deepen inequalities already present between countries and cities (Ram and Honglin Zhang 2002; Lipsey and Sjöholm 2005; Zdanowska 2017). In CEE, immediately following the fall of the Berlin Wall, CEECs were characterised by a centralisation of all economic and administrative management centres in the capital city, as a reflection of the planned economy approach (Śleszyński 2002). Notwithstanding anticipated tend

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