Research / Projects

MARKETS & REGIONS A project on region building and the long term sustainability and potential integrative effects of capital mobility and investment in the Baltic Sea Region

Establishment of markets and creation of regions are acknowledged as slow and incremental processes, but there are also examples of rapid and revolving changes, which can deepen or completely change earlier patterns. Such a revolutionary change was the 1989 downfall of the Soviet system in Eastern Europe, which created completely new conditions for the flow of trade, investments and services between countries that hitherto had been separated despite the geographic proximity.

The Nordic countries have since long tried to find different venues to increase the integration between the countries, but after the fall of the Iron Curtain, these efforts were reformulated to create a “Baltic Sea Region”. Initially, these efforts were contained to various political initiatives in order to increase the level of integration in the region, but since, private business has gradually increased their role as region-maker in the Baltic Sea Region. Upon this, industries from the Nordic countries have transferred parts of their production to the Baltic states, which increased naturally export and import between the countries in the region. Yet another revolutionary change is the ongoing global financial crisis, which in particular has hit the former planned economies in Eastern Europe. The financial systems in the eastern part of the Baltic Sea Region have suffered from enormous credit losses, and this development is expected to continue in the foreseeable future. Furthermore, there are also indications that the volume of foreign direct investments in the manufacturing sector has shrunk dramatically, as the same time as the trade has stagnated. This research project intends to increase our understanding of economic processes that are crucial to create markets and regions. These issues are investigated and analyzed in particular from the viewpoint of foreign direct investments and trade flows in the region. Questions that are guiding the project include:

What are the characteristics of the Baltic Sea Region economic integration since 1989? For example, in what ways and why have the flows of capital, services and goods changed over the last 20 years?To what extent have investment flows been an enabling force in the emergence of this region and to what extent is the potential impact sustainable?Eastward transfers of production accompanied the enlargement of the European Union, but how has this pattern changed after the financial crisis and what are its implications on a sustainable economic development?Will the effects of the global financial crisis lead to a deepened integration of the Baltic Sea Region, or are there any risks of dissolution of the integration efforts made so far?

Thus, our point of departure in this project is the initial post-Soviet liberalisation of trade and investment, and the project analyzes how market forces and capital flows over the last 20 years helped to reshape the regional composition in northern Europe. Using quantitative and qualitative methods (e.g. in-depth interviews and case studies) the project offers a holistic understanding of the “blackbox” of the economic integration process in the region.

Publications

In: . : .

It has been suggested that regionalism is defined “as an economic process whereby economic flows grow more rapidly among a given group of states [in the same region] than between these states and those located elsewhere”. In this paper we approach the economic underpinnings for the Baltic Sea Region by analysing the developments with regard to trade and investment in the quarter of a century that has passed since the fall of the communist regimes that divided the European continent At the same time we look into the political developments that brought the 2009 adoption of the European Union’s first macroregional strategy, the EU Strategy for the Baltic Sea Region. The strategy was a symbolic second milestone with regard to the political endeavours to reintegrate the continent; the first being the 2004 enlargement. Having transformed the Baltic Sea from a ‘Mare Dividum’ to a European ‘Mare Nostrum’ was indeed also a sign of the success of such integrative political processes.However, it may also be argued that the perceived need for a specific strategy in order to further and deepen the integration and reduce the economic gaps within the European Union gives an indication that there was more to be wished for with regard to this region. Further, more recent political developments in Europe as such as well as the constituent countries of this macroregion has cast some doubts on the future. In this paper we ask ourselves whether developments with regard to investments and trade are in congruence with the notion of the building of one integrated region; does it make economic sense to talk about a Baltic Sea Region or is the eastwest divide still present? For example, to what extent have the developments with regard to foreign direct investments proved sustainable? What sectors are leading the way and which are lagging? What divisions remain to be tackled? These are some of the questions that this paper attempts to address based upon a thorough analysis of the existing sources with regard to foreign direct investment and trade flows. In addition, in a concluding section, we open up an analysis on whether recent political development risk nullifying the progress made on the economic arena – or whether Brexit and connected developments are actually reinforcing the European macroregional agenda?

AuthorPublishing yearSubject
Mikael LönnborgMikael Olsson

Research linked to the Baltic region and Eastern Europe

Yes
2017

School/Centre

ENTER forumSchool of Social Sciences
Business Administration

Research area for doctoral studies

-

Baltic Journal of Economics 2012, 12 (2): 89-108.

This paper investigates the dynamics of FDIs in the Baltic Sea Region (BSR) by applying the Poisson Pseudo-Maximum Likelihood estimation method on a gravity model. In particular, we analyze the influence of macro and spatial factors on investment stock changes and discuss whether the origin of these investments and the 2004 EU enlargement have had any effects on BSR FDIs.Our results suggest that EU enlargement has been significant for FDI activity in the region, and that FDI is basically a regional issue as it tends to be bilateral within the region. However, the same results also suggest that geographic distance is not a significant factor. We conclude that while being traditional in nature, the BSR FDI pattern is undergoing changes towards a lesser degree of geographic bias.

AuthorPublishing yearSubject
Mikael LönnborgMikael Olsson

Richard Nakamura


Research linked to the Baltic region and Eastern Europe

Yes
2012

School/Centre

CBEESENTER forumSchool of Social Sciences
Business Administration

Research area for doctoral studies

-

Status

Finished

Project Manager

People linked to the project

Mikael Lönnborg
Professor
School of Social Sciences

More information

Project start: 2010
Project end: 2014

Financier: Östersjöstiftelsen

Research linked to the Baltic Sea region and Eastern Europe: Yes

Information på svenska

School/centre to which the project is linked