Spillovers in the Polish food industry: exploring the role of local externalities and global networks

The objective with this paper is to test whether there are spillovers and agglomeration effects in the Polish food, beverage and tobacco industries. But while most studies on spillovers in developing and transition countries focus on unidirectional spillovers, this study assumes that spillovers may be multidirectional and instead could be based on any kind of ‘community’ related to a geographic cluster or industry. Transition countries in Eastern Europe often invite investors in with open arms and ample tax holidays based on the assumption that they create jobs and their technology spills over on domestic firms’ own capabilities eventually. Preliminary results on horizontal spillovers in this paper show that this is not the case in the Polish food industry. It appears that foreign investors share their own ‘glocal’ network externalities, while production and productivity spillovers among domestic firms are confined to their own and often local networks. Preliminary results are robust in the sense that different analytical approaches (supply curve and production function) lead to a highly similar set of conclusions. The paper rounds of with a discussion of how then to justify the ample tax holidays that Poland offers to foreign investors in the special economic zones designated particularly to industrial development in a regional policy perspective. Future versions of the paper will test further the role of history, e.g. whether former state owned networks in fact could play a role to the formation of spillovers. Also the attempt will be to test for pecuniary
spillovers in forward and backward linkages.