Regional institutional change by design: A comparative analysis of Poland's special economic zones administrations

In the general context of evaluating regional policy and the role of special economic zones in transition, developed and developing countries, the differential role of the zone management companies (ZMCs) under the Polish special economic zones policy is investigated. Only very few prior research designs have been able to investigate this question owing to the relative lack of data on comparative public policy and zone management. We find that all geographies except the Eastern border have succesfull ZMCs. The best performing spend more on infrastructure and tend to have higher governor turnover rates. Promotional outlays and tax allowances are found to be purely compensatory. At the gmina (subzone) level there is a strong impact of the policy on the intensive margin of firms (firm size), but no or a negative impact on the extensive margin (new firms). Bringing the two levels together in a Granger causality analysis suggests that the demand-led design results in a pulling in of the larger sized investors towards pre-existing industrial agglomerations. But subsequently the traditional spillover hypothesis finds support in the data: employment spills over from the zones into their economic adjency or neighbourhoods. In conclusion the best zones irrespective of other factors attract more sizeable firms, more foreign investors and grow them faster. We therefore conclude that governance quality by way of exclusion of other factors must play the largest role in explaining relative success.