Development of foreign direct investment in the context of government aid: A case study of the Czech Republic since 1998

Investment incentives are policy instruments used by governments to stimulate economic growth, attract foreign capital, and develop business activities. This form of government aid plays an important role in decision-making processes regarding localization and host market selection. According to the core-periphery theory, investment incentives aim to reduce regional disparities and support the economic growth and development of structurally disadvantaged regions. Within the Czech Republic, 1070 investment incentives were granted, 599 of which were aimed at foreign investors. The objective of our research was to identify and describe trends and contexts in the development of foreign direct investment (which received an investment incentive) on the national and regional level in the Czech Republic from 1998 to the present (as of October 1, 2024). Overall, one main objective, two research hypotheses, and several partial objectives were defined. Already proven methods in this field, i.e., correlation analyses, the Kruskal-Wallis test, and Moran's coefficient, were used for the fulfilment of the set main objective and partial objectives. The number of foreign direct investments in the Czech Republic has already passed its golden era and similar patterns can be observed for follow-up reinvestments. It was identified that within the research set of 599 granted investment incentives, 113 cases represent reinvestments of original foreign investments. This fact signals that investors are staying in the region long term and shows growing satisfaction with the Czech business environment. However, the volume of these reinvestments has been continuously decreasing since 2014. From the spatial distribution point of view, the Ústí nad Labem Region (CZ042), the Moravian-Silesian Region (CZ072), and the Central Bohemian Region (CZ020) are clearly the most attractive.