This chapter examines the extent of FDI and SME linkages in Poland and the potential for the diffusion of knowledge, technology and skills from foreign multinational enterprises to domestic SMEs. It assesses Poland’s position in the core channels of FDI-SME diffusion – namely value chain relationships; strategic partnerships; labour mobility; and competition and imitation effects – relative to OECD and the European Union peers, as well as across economic activities.
Strengthening FDI and SME Linkages in Poland
Abstract
For FDI-SME spillovers to occur, domestic small and medium-sized enterprises (SMEs) should be exposed to activities of foreign multinational enterprises (MNEs) either directly or indirectly. When SMEs are exposed to MNE activities they form linkages. Strengthening these linkages enhances productivity spillovers through the diffusion of knowledge, technology and skills to domestic firms, and by improving the innovative and scale-up capabilities of SMEs. This chapter explores Poland’s core channels of FDI-SME spillovers, namely value chain linkages, strategic partnerships, labour mobility, competition and imitation effects.
Foreign MNEs can obtain intermediate inputs from local suppliers (i.e. supplier linkages) or by importing from abroad. Opting to source inputs locally creates opportunities for growth for domestic firms, in particular SMEs. Foreign MNEs in Poland predominantly source intermediate inputs from the domestic market, with a local sourcing share of 68%, aligning with large EU economies like Germany and France (OECD, 2019[1]). This strong local integration corresponds to supply chain linkages and potential knowledge spillovers to domestic firms, which are critical suppliers. Despite a tendency for foreign affiliates to rely on other foreign firms operating in Poland for a third of their intermediate inputs, the remaining two-thirds come from domestically-owned firms, with non-MNEs playing a more substantial role than Polish MNEs. This reliance on domestic suppliers, particularly SMEs, facilitates technology transfer and business practice improvements. However, over the past two decades, both foreign and domestic firms in Poland have increasingly turned to international sourcing, driven by the country's integration into global value chains and the EU, which has reduced trade barriers and enhanced cost-efficiency.
Foreign MNEs also significantly contribute as suppliers to local firms, enhancing access to new, high-quality, or cheaper intermediate inputs and promoting knowledge and technology spillovers. Despite a higher share of foreign affiliates' output being exported (35%) or sold to other foreign affiliates operating in Poland compared to the OECD average (27%), domestically-owned firms account for 65% of the demand for foreign affiliates' output. This includes a strong participation from non-MNEs, indicating that Polish SMEs still benefit from forward linkages in the domestic market, even though the potential for spillovers through these linkages is somewhat limited by the high export share.
Strategic partnerships between foreign MNEs and domestic SMEs are established around the development of joint R&D and innovation projects and are key for fostering technology transfer and innovation. In Poland, the overall level of inter-firm collaboration among both SMEs and large firms is significantly lower than in peer EU economies. The low collaboration rate may be attributed to several factors, including limited capabilities of firms, especially small-sized firms, which may find it difficult to access necessary knowledge, technology, and skills. Despite the broader economic and policy challenges that hinder inter-firm co-operation in Poland, certain sectors demonstrate moderate levels of collaboration. The energy sector, for example, has one of the highest levels of co-operation at 36.8%, which surpasses that of neighbouring economies of Czechia and the Slovak Republic. Polish firms, regardless of size, demonstrate a preference for co-operation with domestic entities as opposed to foreign ones, this may limit their potential for innovation and technological spillovers. Moreover, Polish firms enter technology licensing partnerships less often than many comparator economies, suggesting weaker integration into foreign innovation networks and reduced technology spillovers.
Labour mobility, particularly the movement of workers from MNEs to local SMEs, is a significant source of knowledge spillovers within the context of FDI. In Poland, job-to-job mobility, especially in science and technology-related occupations, has been steadily increasing. The high level of mobility can be attributed to favourable permit durations and labour market mobility conditions. However, wages in foreign firms in Poland are significantly higher than in domestic firms, which may discourage labour mobility from FA’s to domestic enterprises and limit room for productivity and skills spillovers. The difference in wages is particularly pronounced in sectors like information and communications and professional services. However, in mining and energy sectors, domestic firms tend to pay higher wages than foreign firms. Higher wages in the renewable energy sector may stem from increased domestic investment and policy commitments to achieving net-zero emissions by fostering a more sustainable energy industry (OECD, 2023[2]; OECD, 2020[3]). The provision of training by FA’s is relatively low compared to domestic firms. The limited training opportunities in SMEs further reduce the likelihood of MNE workers moving to smaller local firms.
FDI-SME diffusion channels involve market mechanisms related to competition and imitation effects. When highly efficient MNEs enter the market, they can incentivise domestic enterprises to enhance their innovation and productivity, regardless of the sector or value chain segment. On a local level, domestic enterprises can imitate the practices of foreign MNEs, benefiting from tacit learning and the introduction of new standards and practices, which can enhance productivity and innovation spillovers. Polish enterprises demonstrated limited engagement with competitors in both product and process innovation, limiting opportunities for economy-wide spillovers through imitation or tacit learning. Polish SMEs and large firms also engage less in same-sector and foreign enterprise co-operation compared to their peers, further decreasing knowledge spillovers from foreign MNEs. A considerable share of SMEs perceive competition as a moderately important barrier to innovation. The overall lack of collaboration with foreign firms constrains the ability of Polish SMEs to compete with large foreign incumbents and leverage the benefits of foreign knowledge and technology spillovers.
Domestic Polish firms can benefit from the presence of foreign multinational enterprises (MNEs) through buy and sell linkages. These linkages include domestic backward linkages, where foreign affiliates source intermediate inputs from local companies, and domestic forward linkages, where foreign affiliates sell intermediates to local firms (OECD, 2023[4]). This section examines these linkages in Poland, with Box 3.1 clarifying the conceptual relationship between foreign firms’ sourcing, value added, and output. Value chain linkages between foreign MNEs and domestic SMEs have the potential to generate knowledge and technology spillovers, enhancing productivity and innovation. By analysing the quality and strength of these buyer-supplier relationships, this section aims to gain insights into their spillover potential and compare them with supplier/buyer linkages in other OECD countries.
To understand value-chain linkages between foreign affiliates and local firms through the optic of data presented in this chapter, it is important to clarify how firm output, value-added and sourcing relate to each other. Firms’ output can be split into value added and sourcing of intermediate inputs (Figure 3.1). Foreign-owned and domestic firms can differ in their sourcing patterns in general and across sectors.
This section focuses on the extent to which foreign firms source intermediates directly from firms established in Poland as opposed to sourcing of inputs from abroad through imports. In addition, the domestic sourcing structure is therefore further split into sourcing from other foreign affiliates established in Poland, domestic MNEs (i.e. Polish firms with establishments abroad) and domestic non-MNEs (i.e. Polish firms with no establishments abroad).
The section does not focus on better understanding to what extent value added generated by foreign affiliates stays in Poland or may be repatriated to home economies, which is also of key interest in the context of the direct contributions that foreign firms have on the growth and development of the host economy. Part of foreign affiliates’ value added is used to pay salaries of their (mostly local) employees and therefore “stays” in the domestic economy. The remaining part, including earnings, may or may not leave the host economy. The latter is particularly important in the context of tax policy.
Source: OECD based on (Cadestin et al., 2019[5])
3.2.1. Foreign affiliates source extensively from Poland’s domestic market
Foreign multinational enterprises (MNEs) in the host economy can choose to purchase intermediate inputs from local suppliers or import them from abroad. When foreign MNEs opt to source inputs locally, it creates new opportunities for domestic SMEs by boosting demand for their products. These backward linkages generate knowledge spillovers as MNEs share knowledge and technology to ensure better-quality inputs from local suppliers and to help them improve their product and service quality, introduce new management and organisational practices and providing training to their employees (Alfaro-Urena, Manelici and Vasquez, 2022[6]). Ultimately, participation in the supplier networks of foreign affiliates helps SMEs reap additional reputational gains over time, facilitating the acquisition of new clients, increasing their sales and expanding their operations in domestic and foreign markets.
Foreign affiliates in Poland source intermediate inputs mostly from the domestic market, pointing towards potential strong supply chain linkages with the local economy. The share of local sourcing of foreign affiliates stands at 68%, slightly below the OECD average (71%) but in line with many other open EU economies with large domestic markets such as Germany (68%), Finland (66%), France (71%) and Sweden (66%) (Figure 3.2, Panel A). In contrast, foreign affiliates in many smaller EU economies, especially in Central and Eastern Europe (CEE), rely extensively on imports of goods and services from abroad (i.e. international sourcing) with their local sourcing shares standing below OECD average levels (e.g. 50% in the Slovak Republic, 56% in Lithuania, and 59% in Czechia). The increased local input purchased by foreign affiliates in larger economies reflects the size of domestic markets and the wider availability of intermediate goods and services, which smaller economies may lack (OECD, 2020[7]; OECD, 2024[8]). Poland’s large domestic market and well-developed industrial base reduces the need for foreign affiliates to rely on imports and supports strong local supply chain relationships.
Within their local supplier networks, foreign affiliates in Poland tend to rely on other foreign firms for input sourcing more than their peers in other OECD economies. This can be partially attributed to Poland’s positioning within GVCs. Foreign affiliates source one third (33%) of their inputs from other foreign affiliates, which is significantly higher than the OECD average (23%) and most peer EU economies – suggesting some clustering of foreign affiliates which tend to buy from and supply to each other (Figure 3.2, Panel B). This phenomenon is generally more pronounced in smaller EU economies like Czechia (48%) and the Slovak Republic (49%) as opposed to countries like Germany (20%), Italy (20%) and Finland (22%) where the supplier base of foreign firms is more diversified and their reliance on other foreign firms less pronounced.
Note: The OECD benchmark countries used in this report are: Finland, Germany, Italy, Lithuania, Czechia, Portugal, and Slovak Republic.
Source: OECD (2019[1]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
Despite the strong buyer-supplier linkages developed among foreign affiliates, two thirds (67%) of their inputs are still sourced from domestically-owned firms, which may offer opportunities for knowledge and technology spillovers. What places Poland apart from other EU economies is the limited role that domestic MNEs play in the supplier networks of foreign firms. Only 10% of foreign affiliates’ inputs are sourced from Polish MNEs compared to 23% in the OECD area (Figure 3.2, Panel B). These findings may reflect the internationalisation challenges of the Polish economy (see Chapter 2) and the limited number of domestic firms that successfully manage to scale up and establish operations abroad. In contrast, domestic non-MNEs (e.g. Polish firms with no establishment abroad), which are responsible for 56% of inputs sourced by foreign affiliates, might have carved out niches in certain markets or specialised in specific products or services that make them more suitable suppliers of foreign affiliates. The participation of Polish non-MNEs in the local supplier networks of foreign firms is stronger than most peer EU economies and the OECD average (53%).
Although specific data differentiating SMEs from non-SMEs are unavailable, the reported shares suggest that Polish SMEs may significantly contribute to the local sourcing of foreign affiliates since they typically comprise a significant portion of non-MNE businesses. Based on patterns encountered in empirical studies on characteristics of multinational firms across different countries, SMEs are generally less likely to engage in international operations while firms that belong to international business groups tend to be larger than other firms on average (Cadestin et al., 2019[5]). While these patterns can vary across different sectors (for instance, there might be more SMEs with MNE status in digital or other services sectors), SMEs are generally more likely to be classified as domestic non-MNEs. These findings suggest that Polish SMEs likely engage extensively with foreign affiliates and may benefit from technology transfer, enhanced business practices, and increased competitiveness.
The share of local sourcing of both foreign and domestic firms operating in Poland has been falling over the past two decades while international sourcing has been increasing (Figure 3.4, Panels A and B). This is not surprising given the rapid integration of the Polish economy into global value chains (see Chapter 2) which allowed firms to source intermediate inputs from various stages of production across different countries. Poland’s integration into the EU during the same period has also reduced tariffs and trade barriers, making international sourcing more attractive and cost-effective. GVC integration typically reduces the share of domestic linkages while disproportionately increasing the pace of domestically produced value added growth due to efficiency gains (OECD, 2023[4]). Polish SMEs can still benefit from productivity spillovers arising from the internationalisation of the economy and exploit the knowledge transmitted through their indirect participation in international production networks. For this reason, a potentially more important policy objective for economies like Poland’s could be the growth in the absolute value of domestic linkages. In fact, the value of local sourcing of foreign affiliates operating in Poland has more than doubled in the past couple of decades, passing from USD 73 billion in 2006 to USD 152 billion in 2020 (Figure 3.4, Panel C).
Note: Foreign MNEs = foreign affiliates of multinational enterprises; domestic MNEs = domestically owned firms with foreign affiliates abroad; domestic non-MNEs = domestically owned firms with no operations abroad. The OECD benchmark countries used in this report are: Slovak Republic, Portugal, Lithuania, Poland, Finland, Germany, and Italy.
Source: OECD (2019[1]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
A more granular analysis by sector shows that both domestic and foreign firms in Poland source intermediate inputs locally – rather than through imports – in services more than in manufacturing. On average, domestic sourcing accounted for about 77% of total sourcing by foreign affiliates in services and 62% of such sourcing in manufacturing (Figure 3.4, Panel A and B). These differences are even more pronounced among domestic firms whose local sourcing accounted for 84% in services and 73% in manufacturing. This is not surprising given that many services are non-tradable and can be sourced only locally. The share of domestic sourcing is lowest for high-technology manufacturing intermediate inputs, particularly among foreign firms (54% of total sourcing of foreign and 67% of domestic firms in 2020), and highest for lower technology services (78% of total sourcing of foreign and 85% of domestic firms in 2020). In monetary terms, foreign affiliates source more domestically in low-technology manufacturing than in high-technology manufacturing (Figure 3.4, Panel C). It would be beneficial to encourage more local sourcing in high-technology manufacturing, given its technology and knowledge intensity, it has the highest spillover potential.
Note: The classification of sectors into the different groups follows the classification outlined earlier in this report (see Chapter 2).
Source: OECD (2019[1]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
3.2.2. Foreign MNEs export a large share of their output or sell it to other foreign MNEs in Poland
Foreign affiliates of multinational enterprises can serve as suppliers to local firms, creating forward linkages that provide access to new, higher-quality, or cheaper intermediate inputs (Criscuolo and Timmis, 2017[9]). MNEs, especially in sectors like machinery, often offer training on product use and share information on international quality standards (Jindra, 2006[10]), helping to set industry benchmarks and diffuse innovation. This enables local firms to adopt these standards and integrate more easily into global markets. Knowledge and technology spillovers from FDI to SMEs can occur through these forward linkages. The extent of these spillovers depends on how much foreign firms' output is used by domestic SMEs to support their production, rather than being exported or used for private consumption.
In Poland a higher share of foreign affiliates’ intermediate output is exported or sold to other foreign affiliates in Poland compared to peer economies, limiting potential spillovers through forward linkages. Almost 35% of the output of foreign affiliates is exported, higher than the OECD average of 27% (Figure 3.5, Panel A). The rest of the output stays in the domestic economy: 25% is used by the final consumer (31% in the OECD area) and 40% for intermediate consumption by local firms (41% in the OECD area) (Figure 3.6). Foreign affiliates of MNEs significantly contribute to domestic intermediate consumption, with a share of 35% above the OECD average of 22% (Figure 3.5, Panel B). This reflects an important cluster of foreign MNEs located in Poland that takes advantage of opportunities created by demand of other foreign affiliates, particularly in the manufacturing sector. Foreign affiliates in smaller CEE economies, such as the Slovak Republic (54%) and Czechia (47%), sell a larger share of their output to other foreign affiliates, while more advanced EU economies like Germany (19%), Finland (21%), and Italy (19%) report lower shares. This suggests that the “quality” output of foreign affiliates is not siloed and is more broadly integrated into domestic supply chains. In contrast, domestically-owned firms in Poland account for 65% of the demand for foreign affiliates’ output, with Polish non-MNEs holding the second-highest share among EU peers (56% compared to 60% in Lithuania and 35% in the Slovak Republic) (Figure 3.5, Panel B). Demonstrating that Polish SMEs continue to benefit from existing FDI spillovers which take place through forward linkages in the domestic market.
Note: The OECD benchmark countries used in this report are: Slovak Republic, Portugal, Lithuania, Czechia, Finland, Germany, and Italy.
Source: OECD (2019[1]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
Note: Foreign MNEs = foreign affiliates of multinational enterprises; domestic MNEs = domestically owned firms with foreign affiliates abroad; domestic non-MNEs = domestically owned firms with no operations abroad.
Source: OECD (2019[1]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
Foreign MNEs and domestic SMEs establish strategic partnerships to develop joint R&D and innovation projects, which can foster technology transfer, particularly in high-tech and knowledge-intensive industries (OECD, 2023[4]). These partnerships can take on various forms, including joint ventures, licensing agreements, research collaborations, globalised business networks (i.e. membership-based business organisations, trade associations, stakeholder networks), and R&D and technology alliances. This section highlights the strengths and opportunities associated with strategic partnerships in Poland.
3.3.1. Co-operation through strategic partnerships on R&D and innovation is relatively low
The degree of inter-firm collaboration in Poland is notably low. Only 14% of Polish enterprises report co-operation through strategic partnerships with other enterprises, compared to 37% in Finland, 25% in Germany, 20% in Czechia, and 19% in the Slovak Republic (Figure 3.7, Panel A). Moreover, both SMEs and large firms tend to lag behind their peers in inter-firm co-operation (Figure 3.7, Panel B). The low levels of co-operation are especially prevalent among smaller firms as they face limited capacities which are linked to challenges in accessing knowledge, technology, skills, and market knowledge (Adamczyk and Sagan, 2015[11]; OECD, 2023[4]). Poland’s limited generation of knowledge-based capital, especially in business R&D and investment, may further constrain small firms’ ability to innovate and access new skills and technology (Goujard and Guérin, 2021[12]; OECD, 2023[4]).
Inter-firm collaboration in Poland lags not only among small firms but also large ones, indicating broader challenges beyond firm size. Poland's economy may be dominated by competitive entrepreneurial culture which may hinder collaboration, with companies exhibiting risk aversion and preferring independent operation (OECD, 2023[4]; OECD, 2023[2]). They may perceive the costs of collaboration, such as sharing intellectual property and making joint investments, as outweighing the benefits, especially when immediate gains are not guaranteed. The policy environment, including factors like contract enforcement, intellectual property protection, and incentives for collaborative R&D, also impacts inter-firm co-operation (see Chapter 5). The availability and effectiveness of support structures such as business incubators, accelerators, and industry associations play a significant role in encouraging collaborative efforts (OECD, 2022[13]; OECD, 2024[8]). Despite the challenges faced by Polish firms, initiatives such as innovation hubs and clusters are continuously being developed to further encourage and foster inter-firm co-operation within the market (Goujard and Guérin, 2021[12]; Marchese et al., 2019[14]).
Polish firms demonstrate moderate levels of co-operation in specific sectors, with the highest levels seen in the following sectors: energy (36.8% of firms), financial and insurance activities (26.5% firms) and the information and communications (25.7% of firms) (Figure 3.7, Panel C). Co-operation is particularly high in technology- and skills-intensive sectors, such as finance and insurance and ICT, suggesting significant spillovers through strategic partnerships. These partnerships may focus on developing new technologies and platforms to benefit customers and expand market reach. Notably, energy sector co-operation in Poland surpasses that of peer economies of Czechia and the Slovak Republic (Eurostat, 2020[15]). Historically, Poland was amongst the most carbon-intensive economies in the EU with approximately 85% of energy originating from fossil fuels (Kardas, 2023[16]). Poland has gradually shifted to a more sustainable and green energy sector that is in line with net zero emissions goals (OECD, 2023[2]; Friedrich Ebert Stiftung, 2022[17]). Inter-firm co-operation is prevalent and increasing in the energy sector, addressing market risks and capital needs through shared risk, capital, and complementary skill exchanges. The high level of co-operation enhances knowledge and technology spillovers, potentially boosting domestic firm productivity within the energy sector.
Enterprises that co-operated on business activities with other enterprises or organisations
Note: An enterprise is considered as innovative if during the reference period it successfully introduced a product or business process innovation, had ongoing innovation activities, abandoned innovation activities, completed but yet introduced the innovation or was engaged in in-house R&D or R&D contracted out. Firms report co-operation in R&D, innovation activities, and other business activities. Small firms = 10 to 49 employees. Medium-sized firms = 50 to 249 employees.
Source: Eurostat (2020), Community Innovation Survey 2020.
Co-operation with other enterprises or organisations in Poland is not common. Polish enterprises primarily collaborate with suppliers (13% of medium- and 7% of small-sized firms), enterprises inside the enterprise group (13% of medium- firms and 7% of small-sized firms), and consultants or commercial labs (12% of medium- and 7% of small-sized firms) (Figure 3.8). Polish SMEs tend to lag behind the EU27 average across all types of co-operation partners. The largest gaps are observed in co-operation with suppliers and clients, as well as with external consultants. Smaller gaps are observed in co-operation with universities and other higher education institutions, public or private institutes, and non-profit organisations; interestingly medium-sized firms collaborate more with universities and higher education institutions than small sized firms. Sectors such as ICT tend to have some of the higher rates of collaboration with academia, particularly among SMEs, primarily driven by the need of firms to enhance technological and innovation spillovers (PARP, 2023[18]). This suggests the existence of a potentially small number of highly knowledge-intensive Polish firms that work on R&D. Although R&D collaboration is a fairly common practice among Polish innovative SMEs, the rate of collaboration falls behind the EU27 average indicating limited scope for innovation and technology spillovers to take place.
% of innovative SMEs*, by kind of co-operation partner
Note: *The enterprise is considered as innovative if during the reference period it successfully introduced a product or process innovation, had ongoing innovation activities, abandoned innovation activities, completed but yet introduced the innovation or was engaged in in-house R&D or R&D contracted out. Non-innovative enterprises had no innovation activity mentioned above during the reference period.
Source: Eurostat Community Innovation Survey (CIS) 2020.
Polish firms, regardless of size, are less likely to co-operate with foreign entities, than with domestic ones. Approximately 43% of large firms partake in co-operation with domestic firms, as opposed to 28% who engage with foreign counterparts (Figure 3.9). Among medium-sized firms, only 25% co-operate with domestic entities and 11% with foreign entities, which is slightly below the EU averages of 29% and 14% respectively. Small firms also show limited co-operation, with 16% co-operating with domestic entities and 4% co-operating with foreign entities, below the EU averages of 21% and 4% respectively. The overall limited co-operation with foreign firms may further constrain productivity among domestic SMEs due to difficulties in benefiting from knowledge and technology spillovers (OECD, 2023[4]). Most enterprises tend to co-operate with one foreign partner, implying that there may be a lack of foreign partners with whom more advanced co-operation can take place (Adamczyk and Sagan, 2015[11]). Poland’s overall limited co-operation with foreign entities may signal limited internationalisation potential of Polish firms and their focus on the domestic market, in comparison to other large peer economies like Finland who are more exposed to foreign firms.
Innovative enterprises that co-operated on R&D and other activities with domestic and foreign enterprises or organisations (% of innovative enterprises)
Note: An enterprise is considered as innovative if during the reference period it successfully introduced a product or business process innovation, had ongoing innovation activities, abandoned innovation activities, completed but introduced the innovation or was engaged in in-house R&D or R&D contracted out. Non-innovative enterprises had no innovation activity mentioned above whatsoever during the reference period. Small firms = 10 to 49 employees. Medium-sized firms = 50 to 249 employees.
Source: Community Innovation Survey 2020, Eurostat.
3.3.2. Polish firms perform moderately in technology licensing agreements
Technology licensing is a relatively common practice among Polish firms. In 2020, approximately 22% of large firms, 11% of medium-sized firms, and 5% of small-sized firms acquired or licensed intellectual property (IP) rights from private businesses’ (Figure 3.10). Polish enterprises are actively acquiring and leveraging IP rights within their domestic market, reflecting a strong emphasis on innovation and technology adoption, which allows Poland to outperform most peer EU economies and suggests that its firms are proactive in enhancing their products and services domestically. Moreover, this signals towards a strong domestic innovation ecosystem and active participation in local IP transactions. The comparatively high diffusion of technology licensing agreement among private enterprises in Poland indicates potential for FDI-SME spillovers to take place through this channel.
% of total firms in innovation core activities
Note: Small firms = 10 to 49 employees. Medium-sized firms = 50 to 249 employees. Large firms = more than 250 employees.
Source: Eurostat, Community Innovation Survey 2020.
Polish firms enter technology licensing partnerships less often than their peer OECD comparators. Approximately 12% of small- and 16% of medium-sized enterprises engage in these partnerships, compared to 13% and 23% in OECD comparators (Figure 3.11). Among large firms, only 9% in Poland engage in technology licensing versus 30% in the OECD, suggesting weaker integration into foreign innovation networks and reduced technology spillovers. This gap reflects the larger firms’ preference for internal R&D or acquisition, while SMEs often rely on external sources of innovation like technology licencing to scale up. Polish firms show lower engagement in licensing foreign technology, highlighting challenges in international collaboration and technology absorption capabilities compared to OECD peers (OECD, 2020[3]). Barriers include limited international networks, regulatory complexities, and differences in technological capabilities. Meanwhile, foreign firms operating in Poland appear to be more engaged in licensing partnerships compared to foreign firms in comparator economies (38% compared to 26%), indicating higher technological intensity among foreign firms. This gap indicates significant potential for FDI spillovers into the Polish economy, facilitated by technology transfers between parent companies and their affiliates. Such transfers, including technology licensing from abroad, are common among MNEs operating in Poland, enabling access to established technologies, faster product development, and risk management in innovation. The high use of foreign technologies by foreign firms operating in Poland confirms the strong potential for spillovers to take place, though it is important to maintain that the potential positive effects may be countered by the limited international exposure of domestic SMEs.
Note: The OECD benchmark countries used in this report are Czechia, Finland, Germany, Italy, Lithuania, Portugal, and the Slovak Republic Data for Finland is available for 2020, for Germany for 2021, and for Portugal for 2023.
Source: Adapted from (OECD, 2022[13]). OECD based on World Bank Enterprise Surveys Enterprise Surveys Indicators Data - World Bank Group.
Labour mobility, especially the movement of MNE workers to local SMEs, is a key source of knowledge spillovers in the context of FDI (OECD, 2023[4]). Workers from foreign MNEs can move to domestically owned enterprises through temporary arrangements, long-term arrangements like open-ended contracts, or through the creation of start-ups (i.e. corporate spin-offs) by (former) MNE workers. Mobility can also occur in the opposite direction, facilitating wage spillovers. This section assesses the potential for spillovers through labour mobility in Poland.
3.4.1. Job-to-job mobility has been slowly increasing in Poland
Labour mobility is higher in Poland than in most peer economies, especially in science and technology related occupations. According to Eurostat data on job-to-job mobility focusing on science and technology sectors, approximately 9% of Polish workers transitioned between occupations during 2020, up from 6% in 2010 (Figure 3.12). In terms of job-to-job mobility, Poland surpasses both the OECD benchmark and the EU average of 7%. Only a few countries, like Lithuania and Estonia, have higher job-to-job mobility in science and technology related occupations, while CEE economies like Czechia and the Slovak Republic have much lower rates. High labour mobility in Poland illustrates an opportunity to enhance the potential for FDI-SME spillovers. The increase in overall job-to-job mobility from 2010 to 2020 can partially be attributed to policies addressing labour shortages through active recruitment and attraction of workers from abroad (PARP, 2023[19]; OECD, 2020[3]).
% of total employed human resources in science and technology
Note: Human resources in science and technology (HRST) describes individuals in science and technology occupations, such as professionals, technicians and associated professionals, as well as those in other occupations who successfully completed a tertiary-level education in science and technology. Job-to-job mobility excludes inflows into the labour market from a situation of unemployment or inactivity. The figure refers to HRST in total NACE (Statistical classification of economic activities in the European Community) Rev 2 activities.
Source: Eurostat, Job-to-job mobility of HRST by NACE Rev. 2 activity dataset (hrst_fl_mobsect2), 2022 (accessed 17 April 2024).
The local labour market is characterised by high levels of job-to-job mobility and favourable conditions for mobility of foreign high-skilled workers. Over the years, Poland has become an attractive country to work in, with skilled migration primarily coming from countries like Ukraine, especially into the ICT sector (OECD, 2023[2]; OECD, 2022[20]). Poland offers more favourable permit duration conditions and faster processing times for non-EU nationals compared to peer economies like Czechia. Highly skilled workers can receive the EU Blue Card, a renewable long-term residency permit for up to three years, reducing the need for short-term renewals and simplifying bureaucratic procedures (EU, 2022[21]). Such favourable conditions encourage skilled workers to relocate, helping to mitigate skills shortages in high-growth sectors where FDI may crowd out competitors unable to retain talented staff (OECD, 2023[4]).
3.4.2. The higher wage premia of foreign affiliates may limit labour mobility towards domestic firms
Wages in foreign firms in Poland are significantly higher than in domestic firms, which may discourage labour mobility from foreign affiliates (FA’s) to domestic enterprises and limit room for productivity and skills spillovers to form. Foreign firms tend to have higher wages than domestic firms due to their productivity, larger size, and robust technological and capital endowment (OECD, 2024[8]). On average, foreign firms’ personnel costs per employee in Poland – a proxy for wages – are around 1.4 times higher than in domestic firms (Figure 3.13, Panel A). When comparing wage premia in Poland to those in other EU economies, it is clear that the difference between wages paid in foreign and domestic firms is much smaller in Poland in comparison to CEE economies.
The wage difference between foreign and domestic firms is significantly smaller in Poland compared to peer economies. This may be attributed to the different types of industries and sectors in which foreign firms operate. If foreign firms are primarily concentrated in lower-wage sectors, or if domestic firms compete in high-wage sectors, this may contribute to smaller wage premiums seen in foreign firms. Moreover, the advanced technologies, management practices, and knowledge that foreign firms introduce drive productivity growth and efficiency (OECD, 2022[22]; OECD, 2023[4]). If domestic firms achieve similar levels of productivity growth through other means, the wage differential may closely align with wage premiums. While foreign-owned firms in Poland have typically been more productive than domestic firms, the latter have been experiencing faster total factor productivity growth, making them increasingly attractive for worker mobility back to domestic firms over time (World Bank, 2021[23]).
At the sectoral level, wage disparities between foreign and domestic firms in Poland are more prominent in-service sectors such as information and communications and professional services, with the biggest gaps present in construction and real estate sectors (Figure 3.13, Panel B). The significant gap in wages may discourage workers from large foreign MNEs to move to smaller domestic firms operating in these sectors, suggesting that this may not be a major source of productivity spillovers for Polish SMEs. However, in mining and energy sectors, domestic firms tend to pay higher wages than foreign firms. Higher wages in the renewable energy sector may result from increased domestic investment in the sector and policy commitment to achieving net zero emissions through the creation of a more sustainable energy sector (OECD, 2023[2]; OECD, 2020[3]). As discussed earlier in the chapter, the energy sector’s high level of co-operation between foreign and domestic firms facilitates knowledge and skill spillovers. Wage disparities between foreign and domestic firms in Poland are relatively stable and persistent, varying by sector, and while foreign firms generally offer higher wages, the gap has not significantly increased over time (Broniatowska and Strawiński, 2021[24]).
Source: Eurostat FATS dataset (accessed 03 June 2024).
3.4.3. There is limited FDI contribution to the diffusion of skills through training provision
Foreign affiliates can contribute to the increase of the supply of skills on the domestic market, by providing training to their employees. The availability of in-work training and learning opportunities influences the quality of the working environment and significantly impacts workers’ job mobility decisions (Cazes, Hijzen and Saint-Martin, 2015[25]; OECD, 2022[13]). When employees move back to domestic firms or start their own business, they bring their knowledge and know-how along with them. Moreover, foreign investors can prompt local firms to invest in upskilling in response to the heightened competition, helping local entrepreneurs to mitigate the brain drain towards foreign employers. The provision of training by foreign affiliates to their employees can enlarge the domestic talent pool, foster local entrepreneurship development and attract further FDI.
Foreign firms in Poland tend to provide less on-the-job training compared to domestic firms, with only 13% foreign and 21% of domestic firms offering such training (Figure 3.14, Panel A). Poland is among the few countries where domestic firms outperform foreign counterparts in terms of training opportunities as opposed to peer CEE economies like Hungary where the opposite trend is observed. Overall, both foreign and domestic firms in Poland perform significantly worse than the OECD average in terms of training opportunities. Firm expenditure on staff training in innovative Polish firms is on par with most European peers. Small firms account for approximately 13% of training expenditure, while medium and large-sized firms account for 19% and 69% of training expenditure respectively (Figure 3.14, Panel B). Polish SMEs account for a smaller share of training expenditure compared to peer economies of Lithuania and Estonia, while large firms dominate surpassing Estonia, Portugal, and Lithuania. The difference in expenditure may be attributed to varying training needs between SMEs and large firms, as SMEs may prioritise foundational and specialised training to enhance competitiveness and retain employees. The limited provisions of training within the SME sector may further discourage the mobility of MNE workers towards smaller local firms, reducing the potential for knowledge spillover through this diffusion channel.
Note: For Panel A data on Finland and Ireland refers to year 2020; on Austria, France, Germany, and Spain refers to year 2021; and on Croatia, Hungary, Portugal, and Romania refers to year 2023. For Panel B data on Romania, France, Austria, and Lithuania refer to year 2018. Panel B shows expenditures of enterprises by area of expenditure for innovation active enterprises in thousand euro.
Source: Panel A World Bank Enterprise Survey. Panel B Eurostat CIS survey 2020.
FDI-SME diffusion channels involve market mechanisms which are related to competition and imitation effects. Competition effects arise when highly efficient MNEs enter the market, thereby creating pressure for domestic companies to become more innovative and productive regardless of their operating sector or value chain segment (OECD, 2022[13]; OECD, 2023[4]). Imitation and tacit learning effects occur on a more local level when domestic enterprises imitate practices of foreign MNEs (OECD, 2024[8]). The introduction of new standards and practices by foreign firms can also enhance productivity and innovation spillovers at the local level (OECD, 2023[4]). This section examines how and to what extent competition and imitation effects might be at play in Poland’s FDI and SME sectors.
3.5.1. Same-sector co-operation on innovation with competitors is fairly limited in Poland, especially with foreign firms
Frequent collaboration with foreign-owned competitors enhances opportunities for imitation and tacit learning for local firms, especially within the same sector or value chain (OECD, 2023[4]; OECD, 2024[8]). Foreign competitors often introduce new standards and practices, leading to new products and processes, as well as contributing to productivity growth (OECD, 2023[4]; OECD, 2022[13]). Co-operation in innovation enables local enterprises to access knowledge and technology with collaboration occurring along the supply chain (PARP, 2015[26]).
Polish enterprises engage less with competitors in product and business process innovation compared to peer economies (Figure 3.15, Panel A). Poland's medium-sized firms show low collaboration with competitors in both product and process innovation, with only 5.9% and 5.6% of firms engaging in co-operation respectively. Moreover, small firms also lag in co-operation in both product and process innovation, with only 1.9% and 2.5% of firms engaging in it respectively. This is significantly lower to comparator economies of Czechia, Hungary, and the Slovak Republic. Poland’s overall limited co-operation with competitors in product and business processes as well as through strategic partnerships can constrain productivity among domestic SMEs due to difficulties in benefiting from knowledge and technology spillovers (see Section on strategic partnerships). Moreover, Poland’s limited co-operation with competitions may indicate fewer opportunities for economy-wide spillovers to take place through imitation or tacit learning or through inter-firm partnerships.
Poland continues to lag behind in same sector-cooperation as wells as in collaboration with foreign competitors (Figure 3.15, Panel B and C). The limited same-sector co-operation can be partly attributed to Poland’s competitive entrepreneurial culture. Which fosters risk aversion and a preference for independent operation (OECD, 2023[4]; OECD, 2023[2]). Enterprises may often perceive the costs of collaboration, such as sharing intellectual property and making joint investments, as outweighing the benefits, particularly when immediate gains are not guaranteed (see Section on strategic partnerships). Approximately 2.5% of medium-sized and 2.4% small-sized firms engage in R&D and innovation co-operation with same sector competitors, this is lower in comparison to peer economies of Finland and Lithuania. Among large firms, 5.9% partake in same-sector inter-firm partnerships. Moreover, co-operation on innovation with foreign enterprises, within and outside the EU, is lower among Polish SMEs and large firms compared to peers like the Slovak Republic, Hungary, and Ireland (Figure 3.15, Panel C). Limited same-sector and foreign enterprise co-operation may restrict opportunities to enhance local enterprise productivity due to reduced knowledge spillovers from foreign MNEs (OECD, 2023[4]). Given limited collaboration with foreign firms, Polish SMEs may struggle to compete with large foreign incumbents and maintain sector relevance due to limited knowledge and technology spillovers. Interaction with foreign firms can benefit domestic enterprises by facilitating process imitation as well as product quality improvement (Brandt, 2018[27]). Therefore, indirect learning through market competition with foreign practices can still drive innovation and growth for Polish SMEs.
Note: The enterprise is considered as innovative if during the reference period it successfully introduced a product or business process innovation, had ongoing innovation activities, abandoned innovation activities, completed but yet introduced the innovation or was engaged in in-house R&D or R&D contracted out. Small firms = from 10 to 49 employees. Medium-sized = from 50 to 249 employees. Large = 250 employees or more. Micro firms with less than 10 employees are not included.
Source: Eurostat Community Innovation Survey (CIS) 2020 (accessed 21 March 2024).
3.5.2. Few Polish firms view competition as a major barrier to innovation
Polish SMEs cite lack of internal finance and high costs as major barriers to innovation, with high competition seen as less significant compared to other EU economies. Approximately 9.1% of small firms, 7.9% of medium-sized firms, and 6.3% of large-sized firms consider high competition as a significant barrier to innovation, this is lower than the EU averages of 14%, 12%, and 11% respectively (Figure 3.16). Most firms tend to view competition as a moderately important barrier (Eurostat, 2020[28]). The perception of market competition as a barrier to innovation can limit knowledge and productivity spillovers (OECD, 2023[2]).
The entry of foreign firms into the domestic market, may increase competition and force-out non-productive firms (OECD, 2023[4]; OECD, 2024[8]). The reallocation of resources towards more productive firms is crucial for improving economic and productivity growth, as it drives firms to innovate, introduce new products, and adopt new management practices. High business dynamism may create market distortions that hinder SME growth and competitiveness. In highly competitive markets, firm exits may highlight the removal of inefficient incumbents and the difficulties of newer enterprises to scale up and participate in knowledge-intensive activities (OECD, 2021[29]). Business demography indicators such as market entry and exit rates, churn rate, and business survival are essential for assessing competition and market conditions in Poland’s economy. As described in Chapter 2, Poland exhibits fairly high business dynamism with moderate rates of firm births and deaths, and a churn rate above the OECD average across the business economy. Poland’s 1-year business survival rate was 84% in 2020, slightly above the EU average (82%) (Eurostat, 2024[30]). These findings may point to a potentially challenging environment for smaller firms to scale up, as a high churn rate signals the existence of barriers to SME innovation and productivity growth. A moderate rate of firm births and deaths indicates a relatively friendly market for entrepreneurs and investors, leading to a moderate number of startups. Consequently, moderate levels of market competition may be a signal of moderate efficiency of competition/imitation effects for FDI-SME knowledge spillovers in the Polish economy.
% of innovative enterprises rating the importance of high competition as a “high”, “medium”, “low” or “not important” barrier to innovation, by size class
Note: Small firms = from 10 to 49 employees. Medium-sized firms = from 50 to 249 employees. Large-sized firms = more than 250 employees. EU average of the following countries: Austria, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, France, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Romania, Slovak Republic, Spain, Sweden, Switzerland, Türkiye.
Source: Eurostat Community Innovation Survey (CIS) 2020 (accessed 21 March 2024).
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