This chapter provides an overview of key findings and policy considerations to strengthen FDI and SME linkages in Poland. Specifically, it presents the main challenges and opportunities for foreign direct investment (FDI) and small and medium-sized enterprises (SMEs) and examines their role in supporting productivity and innovation. Based on an assessment of Poland’s regulatory and policy framework, the chapter also derives recommendations for policy reform to strengthen the spillover potential of FDI and the productive capacities of Polish SMEs at the subnational level.
Strengthening FDI and SME Linkages in Poland
Abstract
1.1.1. Poland's economy experienced robust growth over the past two decades
Over the past two decades, the Polish economy has experienced robust growth, emerging as one of Europe's fastest-growing economies pre-pandemic, with GDP per capita doubling between 2000 and 2022. This convergence was driven by capital accumulation, efficiency gains, and substantial foreign direct investment (FDI), which facilitated sectoral restructuring and deeper integration into global value chains (GVCs). Poland's EU accession in 2004 further accelerated its integration into GVCs, raising GDP per capita from almost 50% of the OECD average in 2004 to 80% in 2022. Despite these advancements, Poland’s GDP per capita remains below the EU average, reflecting ongoing challenges stemming from labour market constraints and limited innovation investment.
Poland’s economy is highly diversified but relies heavily on low-tech activities, which dominate both manufacturing and services. Services account for 64% of total value added, while in manufacturing, low-tech industries contribute 13%, and high-tech activities only 6%—a smaller share than in most EU peer economies The automotive and transport equipment sectors represent 53% of high-tech manufacturing and 16% of total manufacturing, indicating a well-established industrial base of automotive manufacturers and suppliers. However, the share of high-tech manufacturing in the overall economy has stagnated over the past two decades. At the regional level, differences in infrastructure, workforce skills, and industrial specialisation have made it more difficult for certain regions—such as Warmińsko-Mazurskie and Podlaskie—to expand beyond low-tech sectors and integrate into higher-value segments of GVCs. This reliance on low-tech activities may constrain the knowledge-intensity of the economy and the potential for productivity and innovation spillovers.
Poland's openness to international trade and integration into GVCs have been key drivers of economic growth. Exports nearly quadrupled over the past two decades, rising from 27% of GDP in 2000 to 63% in 2022. Despite a relatively diversified export structure, 60% of gross exports are still concentrated in low-technology goods and services. Poland is strongly involved in GVCs, which could potentially bring new opportunities for productivity growth and innovation by enabling domestic firms to use inputs that are not available in the domestic economy or by accessing technology and knowledge brought from export destinations. However, Poland’s downstream position in GVCs –focused on assembling imported intermediate inputs– limits local procurement and weakens linkages between foreign MNEs and domestic suppliers.
1.1.2. FDI has been a key driver of Poland’s economic catch-up with higher income economies
Poland has emerged as an attractive destination for FDI due to its lower labour costs and strategic position within European value chains. The surge of FDI during the early 2000s was crucial for the development of new industries and GDP growth. While FDI inflows slowed after the global financial crisis, they rebounded strongly thereafter, reaching a record high of over USD 30 billion in 2022, primarily driven by reinvested profits. During the COVID19 pandemic, FDI inflows showed resilience in Poland. Between 2019 and 2020, investments grew by 15%, followed by a staggering 95% increase from 2020 to 2021, outpacing peer countries that typically experienced declines in FDI. In 2023, Poland’s FDI stock accounted for almost 40% of GDP, slightly lower than the OECD and EU averages but higher than advanced EU economies like Germany and Finland (Figure 1.1, Panel A).
FDI in Poland is predominantly sourced from EU Member States (86% in 2022), over 40% of which was from the Netherlands and Germany. Although Poland’s low diversification in terms of FDI origin reflects the country’s strong positioning within European value chains, some FDI in Poland may originate from non-EU investors who invest in the country through European intermediate investors. Many companies, especially outside Europe, may channel their investment through different countries for strategic reasons related to market, regulations or policy conditions. The diversity of investor origins can influence FDI and SME spillovers. Investors from geographically and culturally closer countries tend to strengthen regional value chains, enhancing business networks and knowledge transfer (OECD, 2023[1]). Conversely, investors from more distant locations might be more inclined to source inputs from domestic suppliers, as maintaining relationships with suppliers from their home countries can be costly, thus promoting the creation of vertical linkages (Javorcik and Spatareanu, 2011[2]).
Source: Panel A: OECD International Direct Investment Statistics, 2023; Panel B: National Bank of Poland, FDI in Poland, https://nbp.pl/en/publications/cyclical-materials/foreign-direct-investment-in-poland/.
Foreign firms are key contributors to Poland’s economy, particularly in manufacturing, where they play a significant role in value added and exports. However, their presence in high-technology services is less pronounced, which suggests untapped potential for enhancing productivity and innovation through FDI. The limited investment in high-tech services underscores challenges in leveraging FDI to drive knowledge spillovers. Post-pandemic increases in manufacturing FDI, potentially linked to the restructuring of GVCs, present Poland with the opportunity to strengthen its integration into high-tech industries, fostering further technology and knowledge spillovers.
Poland’s FDI stock is predominantly concentrated in sectors with medium productivity and high R&D expenditure such as manufacturing, information and communication, and financial services, which together represented over 50% of the total FDI stock and 70% of R&D expenditure in 2022. However, while FDI is concentrated in R&D-intensive sectors, overall, FDI in R&D is lower compared to other OECD and EU countries. From 2003 to 2023, less than 2% of greenfield projects involved R&D activities, a lower share compared neighbouring peer countries such as Czechia, Slovenia and the Slovak Republic. This is likely due to the concentration of FDI in assembly and processing activities in these sectors, where foreign firms might invest less in R&D and rely on technologies developed abroad. While there is a positive correlation between FDI and R&D intensity, it remains unclear whether FDI has driven higher R&D levels in these sectors or if FDI is attracted to them due to their knowledge-intensive nature. Several studies have attempted to measure the impact of FDI on productivity and innovation in Poland, pointing mostly to positive effects, particularly in sectors where there is potential for greater technological upgrading.
Foreign firms in Poland are, on average, 43% more productive than domestic firms, with the productivity gap particularly pronounced in low-technology services and manufacturing. Foreign firms tend to outperform domestic firms and exhibit higher productivity growth, especially in sectors with lower levels of GVC participation. In regions that attract larger shares of FDI such as Dolnośląskie, foreign affiliates outperform domestic firms by a wider margin than in areas like Lubelskie, where FDI inflows have historically remained modest. The potential for FDI spillovers to domestic firms is contingent on the productivity gap not being too wide, as excessively large gaps may hinder the absorption of new technologies and practices by domestic firms. Strengthening buyer-supplier relationships between domestic SMEs and foreign firms through targeted development programmes could enhance Polish firms’ integration into GVCs, increasing their productivity and narrowing the gap with foreign competitors. However, the extent of this gap varies noticeably across regions.
1.1.3. SMEs could be further supported to scale up and upgrade their capabilities
Poland’s economy is dominated by micro firms, which make up 95% of the business sector. This is coupled with high business dynamism, as illustrated by the high enterprise birth and death rates. These micro firms contribute disproportionately little to value added and turnover relative to their employment share. The notable absence of medium-sized enterprises, which make up only 1% of the non-financial business sector, indicates systemic challenges in scaling up operations and fostering knowledge and technology transfers to smaller businesses, particularly in sectors that are crucial to the domestic economy and have attracted significant FDI levels. Small and medium-sized firms represent only 5% of the business population and account for 32% of employment, 34% of value-added, and 33% of total turnover (Figure 1.2). SMEs are particularly prominent in lower technology manufacturing sectors such as textiles, wood and metal products, though their participation in higher technology manufacturing and services remains relatively low. The overall productivity of SMEs lags behind larger firms, with the productivity gap being most prominent in the FDI-intensive manufacturing sector, where most of the potential for linkages with foreign MNEs exists.
Note: The year of reference is 2020 (or the latest year available). Enterprises are categorised based on the number of employees: micro enterprises (1–9 employees), small and medium-sized enterprises (SMEs) (10–249 employees), and large enterprises (250 or more employees). Self-employed activity may be included in the data covering micro-enterprises. In some cases, such activity is driven by alternative work arrangements rather than reflecting traditional business operations, potentially impacting the interpretation of micro firms’ dynamics.
Source: OECD Structural Demographics and Business Statistics (SDBS) and Trade by Enterprise Characteristics (TEC) databases, 2023.
The internationalisation of Polish SMEs remains relatively low in comparison to OECD peers. SMEs account for 45% of total export value, with micro firms having the lowest participation in international trade. Internationalisation among Polish firms also varies by sector, with larger firms dominating manufacturing exports (76%), while SMEs, especially micro firms, play a substantial role in services. Polish SMEs face higher export costs and tend to engage indirectly in global markets through upstream linkages with larger exporters. Their low internationalisation might reduce their exposure to global shocks but also prevents them from seizing the opportunities that export-intensive and FDI-driven industries bring for productivity growth.
SMEs contribute relatively little to Poland’s knowledge-based capital, with only 33% of business R&D expenditure being attributed to them. In comparison, SMEs account for 70% of business R&D in the Baltic countries, 43% in the Slovak Republic and 39% in Hungary, signalling more dynamic SME innovation ecosystems in these countries. In 2023, the proportion of Polish SMEs introducing product, process, and organisational innovations, as well as collaborating with other firms to generate innovation outputs, was lower than the EU average and that of most comparator countries. For every 10 SMEs introducing product or process innovation in the EU, 4.3 Polish SMEs were doing so. High innovation costs, difficulties in obtaining public grants, and skills shortages have been cited as key barriers that hinder Polish SMEs’ potential to engage in innovative activities and benefit from technology adoption.
As seen in other OECD economies, Polish SMEs face challenges in hiring and retaining skilled staff, due to resource constraints and lack of internal HR capabilities. In 2023, 78% of them reported difficulties in hiring employees with the right skills, while for almost 30% of Polish SMEs the lack of qualified employees represents a significant barrier to innovation. While large companies often have dedicated HR divisions, SMEs struggle to offer competitive compensation and lack the resources to upgrade the skills of their workforce. Polish SMEs also underperform in employee training compared to EU peers, with only 35% of small firms and 59% of medium firms offering training to their employees, less than the EU average (64% and 83% respectively) and below the performance of most peer EU economies.
While financing conditions in Poland generally support business investment, access to finance for SMEs remains a challenge –particularly in remote or less developed regions, such as Świętokrzyskie, where financial institutions are fewer and less specialised, resulting in higher transaction costs and limited access to growth capital. The Polish banking sector, known for its stability and high liquidity, has facilitated external financing, with 54% of Polish firms that invested using external funds in 2023. A significant financing gap persists between SMEs and large firms; with 66% of large firms securing investment finance from external sources, compared to 29% of SMEs. Polish SMEs face higher financial constraints due to credit rejections and high borrowing costs and primarily rely on traditional financing methods, such as leasing and overdrafts. In contrast, they are less likely to access equity finance, which limits their growth and innovation potential. Only 4% of SMEs consider equity financing relevant, and just 2% uses it for innovation activities, much lower than in comparator countries. The reliance on debt over equity financing may constrain SMEs’ ability to scale up and innovate, underscoring the need for alternative financing solutions.
For FDI-SME spillovers to occur, domestic SMEs need to be exposed to activities of foreign multinational enterprises (MNEs), either directly or indirectly. The exposure of SMEs to MNE activities can facilitate the formation of linkages, which can enhance productivity spillovers through the diffusion of knowledge, technology, and skills to domestic firms, while also improving SMEs’ innovation and scale-up capabilities. To enhance the exposure of SMEs to these benefits, Poland should aim to attract higher-technology FDI while strengthening SME absorptive capacity through targeted support measures, enabling greater integration into GVCs. Core channels of FDI-SME spillovers include value chain linkages, strategic partnerships, labour mobility, competition and imitation effects.
1.2.1. Foreign affiliates source extensively from Poland’s domestic market
Foreign MNEs can source intermediate inputs either locally or through imports. Sourcing from domestic suppliers (i.e. backward linkages) creates growth opportunities for local firms, particularly SMEs, by promoting technology transfer and business practice improvements. In Poland, foreign MNEs source 68% of their intermediate inputs locally, on par with large EU economies such as Germany and France (Figure 1.3, Panel A). This reflects strong domestic integration, facilitating supply chain linkages and potential knowledge spillovers. Despite a reliance on other foreign affiliates operating in Poland for a third of their inputs, foreign MNEs source two-thirds of their intermediate inputs from domestically-owned firms, with non-MNEs playing a more substantial role than Polish MNEs. However, Poland’s increasing integration into GVCs and the EU has led both foreign and domestic firms to turn more towards international sourcing over the past two decades, reflecting enhanced access to a wider variety of inputs and increased cost-efficiency.
Foreign MNEs also act as key suppliers for local firms (i.e. forward linkages), providing access to new or higher-quality inputs and enabling knowledge and technology diffusion. Many MNEs, especially in industrial sectors such as machinery, often offer training to their customers on the use of their products as well as information on international quality standards. 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 presence of Polish non-MNEs, many of which are likely to be small and medium-sized enterprises that can benefit from better quality inputs provided by foreign affiliates.
Note: The OECD benchmark countries used in this report are: Finland, Germany, Italy, Lithuania, Czechia, Portugal, and Slovak Republic.
Source: OECD (2019[3]), Analytical Activity of Multinational Enterprises (AMNE) Database, www.oecd.org/sti/ind/analytical-AMNE-database.htm.
1.2.2. Inter-firm partnerships on R&D and innovation are less common in Poland
Poland’s performance in establishing strategic partnerships between foreign MNEs and domestic SMEs lags behind peer EU economies (Figure 1.4, Panel A). Foreign MNEs and domestic SMEs can establish strategic partnerships around the development of joint R&D and innovation projects, which are key to fostering technology transfer and innovation. The low inter-firm collaboration rate in Poland 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 these challenges, certain sectors, such as energy, show higher levels of co-operation, surpassing neighbouring economies. Polish firms, regardless of size, demonstrate a preference for partnering with domestic entities over foreign ones, suggesting potential challenges in benefiting from innovation and technological spillovers from FDI (Figure 1.4, Panel B). Moreover, Polish firms enter technology licensing partnerships less frequently than those in several comparator economies, suggesting weaker integration into foreign innovation networks.
Note: An 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. 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.
1.2.3. FDI spillovers through labour mobility and competition are less likely to happen
Labour mobility can be a key driver of knowledge spillovers through the movement of skilled workers from foreign MNEs to domestic enterprises. Yet, in Poland, significant wage disparities and limited training opportunities provided by foreign affiliates hinder the transfer of skills and productivity gains to local SMEs, especially in high-wage sectors. Job-to-job mobility has been steadily increasing over the past decade, partly due to favourable work permit durations for third-country nationals and flexible labour market regulations. However, the substantially higher wages offered by foreign affiliates likely discourage workers from moving to Polish enterprises. The wage difference is particularly pronounced in the information and communications sector and professional services. In contrast, in the energy sector, domestic firms often offer higher wages than foreign firms. The potential for FDI-SME spillovers through labour mobility also depends on the skills intensity of FDI and the training opportunities available to SMEs in the domestic economy. In Poland foreign affiliates provide relatively fewer training opportunities compared to domestic firms, further reducing the likelihood of highly skilled MNE workers moving to smaller local firms.
The entry of highly efficient MNEs into the market can pressure domestic enterprises to enhance their innovation and productivity. Conversely, domestic enterprises can imitate the practices of foreign MNEs, benefiting from tacit learning and the adoption of new standards and practices, which can enhance productivity and innovation spillovers. However, not all potential spillovers are positive. The competitive pressure exerted by foreign MNEs may also lead to the crowding out of domestic SMEs, particularly those with limited resources to invest in innovation or adapt to new competitive dynamics. In Poland, potentially positive effects from the operations of foreign firms are constrained by limited market interactions, as domestic firms, especially SMEs, engage less in competition-driven innovation and co-operation with foreign MNEs. Polish enterprises demonstrate limited engagement with competitors in both product and process innovation, limiting opportunities for economy-wide spillovers through imitation or tacit learning. Moreover, Polish SMEs and large firms engage less in same-sector and foreign enterprise co-operation compared to their peers. A considerable share of SMEs perceive competition as a moderately important barrier to innovation. The limited collaboration with foreign firms may restrict the ability of Polish SMEs to compete with large foreign incumbents as well as benefit from foreign knowledge and technology spillovers.
1.3.1. Addressing uneven FDI attraction and diffusion to reduce regional disparities
FDI has been instrumental in driving economic growth and fostering social and territorial cohesion across Poland's regions. However, the uneven distribution of these investments risks deepening existing disparities, particularly in regions with lower employment, weaker infrastructure, and limited economic opportunities. Regions such as Dolnośląskie and Mazowieckie have been more successful in capitalising on high levels of FDI, especially in high-tech industries and through robust linkages with domestic SME suppliers. In contrast, less-developed areas like Warmińsko-Mazurskie, Świętokrzyskie, and Podlaskie lag behind, facing slower industrial growth and fewer opportunities for SME development and innovation. These disparities are shaped by each region’s specific assets. Certain regions, such as Pomorskie, benefit from strong maritime logistics and a growing IT sector, while others, like Lubuskie, are anchored by cross-border trade connections with Germany. Differences in regional endowments underscore the need for place-based policy measures to leverage FDI and SMEs in support of productivity and innovation.
Investment sources differ considerably across regions, with some areas relying more heavily on FDI, while others depend predominantly on EU funds or local government expenditure. For example, in Dolnośląskie, FDI accounts for 34% of total regional investment, compared to less than 2.5% in Świętokrzyskie, underscoring the extent of regional disparities. The uneven distribution of FDI across Poland’s voivodeships is evident not only in absolute terms but also on a per capita basis (Figure 1.5). While aggregate data indicate Mazowieckie’s strong integration into GVCs, the region exhibits significant intra-regional disparities. Notably, the Warsaw Capital Region (NUTS2) alone accounts for approximately 40% of Poland’s total FDI. Meanwhile, areas such as Podlaskie and Warmińsko-Mazurskie remain less integrated and consequently attract fewer investments. This concentration of FDI in more developed regions perpetuates a cycle where high-tech industries continue to expand while less-developed areas struggle to close development gaps.
In million USD
Source: OECD based on data from the National Bank of Poland.
1.3.2. Building regional capacities to attract and retain FDI
Enhancing the absorptive capacity of local economies is essential for ensuring that foreign investment translates into sustainable regional development. In less-developed regions, this capacity is often constrained by inadequate infrastructure, weak business ecosystems, and a shortage of skilled labour. FDI inflows are strongly linked to GDP growth and job creation, with regions attracting higher levels of FDI generally experiencing faster economic expansion and employment gains (Figure 1.6). However, the extent to which FDI drives broader development depends on the ability of local firms to integrate and apply the advanced technologies and knowledge brought by foreign investors. In many less-developed regions, this remains a challenge due to persistent infrastructure gaps and limited investment in workforce development. Strengthening linkages between foreign investors and local SMEs, alongside targeted investments in human capital, will be crucial to ensuring that FDI contributes to more inclusive and sustainable economic growth.
Note: Calculated as the increase of absolute values of 2022 with respect to 2013.
Source: OECD based on Financial Times fDi Market and OECD Regional database.
The sectors that benefit most from FDI do not always align with those generating the highest levels of employment (Figure 1.7). While manufacturing and construction have attracted significant FDI, particularly in regions such as Mazowieckie and Dolnośląskie, less developed areas often receive investments in lower value-added sectors, which limits the potential for long-term economic transformation. In addition, significant productivity disparities exist between foreign and domestic firms across regions, reflecting differences in sectoral composition and local conditions. For instance, foreign firms in northern regions show a substantial productivity advantage over domestic firms, while in the centre and northwest of Poland, domestic firms outperform foreign firms. Targeted policies to improve technological adoption and operational efficiency in lagging regions will be necessary to close these productivity gaps.
Source: OECD based on Financial Times fDi Markets.
Wage disparities between foreign and domestic firms further highlight regional economic inequalities (Figure 1.8). Northern and eastern regions show substantial wage differentials, with foreign firms offering significantly higher wages compared to their domestic counterparts. In contrast, wage gaps in regions in the centre and southwest are narrower despite the presence of higher productivity levels, suggesting that local labour market conditions, firm-specific wage-setting policies, and the availability of skilled workers influence wage outcomes. Expanding skills development programmes, improving vocational training, and increasing upskilling opportunities will be essential for fostering wage growth from FDI and promoting more equitable labour market integration across regions.
The uneven distribution of technological advancements between foreign and domestic firms may also present a barrier to regional development. In northern regions, foreign firms lead in product innovation, whereas in the centre and northwest of Poland, domestic firms are more innovative. At the same time, capacity gaps among regional institutions, including subnational authorities and local agencies, remain significant. While some voivodeships such as Śląskie and Mazowieckie maintain strong investment promotion teams and well-developed industry clusters, several eastern regions rely on smaller, less-resourced public institutions. Strengthening their capabilities could help align local needs with national FDI-SME strategies more consistently.
Note: Our study utilises in this chart the territorial divisions in the World Bank's Enterprise Surveys. This approach mirrors the aggregations used in peer countries like Latvia, Lithuania, Slovakia and Portugal, allowing for a meaningful comparative analysis beyond absolute figures to assess relative performance of Poland.
Source: (World Bank, 2022[4]).
1.4.1. Poland’s FDI-SME policy governance is partially integrated, characterised by shared responsibilities across ministries and agencies
Poland’s approach to FDI-SME policy governance is characterised by a shared responsibility model, where multiple ministries and agencies are involved in designing and implementing policies that support FDI and SMEs. This partially integrated framework is common across many EU countries. As seen in Figure 1.9, the Ministry of Development and Technology (MRIT), the Ministry of Development Funds and Regional Policy (MFIPR), the Ministry of State Assets (MAP) and the Ministry of Finance collaborate and have a joint mandate on policy design and implementation of investment, SME, regional, and innovation support initiatives. The Ministry of Development and Technology (MRIT) is responsible for investment promotion, SME support, and innovation policies, working closely with the Polish Investment and Trade Agency (PAIH). However, unlike some OECD institutional settings where both the investment promotion agency (IPA) and SME agency report to the same ministry, in Poland, the Polish Agency for Enterprise Development (PARP) operates under the Ministry of Funds and Regional Policy (MFIPR), not MRIT.
Note: The main institutions acting upon FDI and SME linkages are designated in red. All the other institutions provide a complementary contribution to FDI and SME linkages.
Source: OECD elaboration based on EC/OECD Survey of Institutions and Policies enabling FDI-SME Linkages (2024).
Alongside the MRIT, which holds a central role, other institutions contribute significantly to Poland's FDI-SME policy framework. The Ministry of Finance shapes tax policy and contributes to macroeconomic stability. While it plays a role in international financial co-operation, the co-ordination and management of EU structural funds are primarily handled by the Ministry of Development Funds and Regional Policy (MFIPR). MFIPR is also responsible for co-ordinating regional development and ensuring alignment with national strategies. The National Centre for Research and Development (NCBR), operating under the Ministry of Science and Higher Education and partially under MFIPR, fosters innovation and R&D collaboration. The Industrial Development Agency (ARP), which is supervised by the Ministry of State Assets (MAP), focuses on restructuring strategic industries and managing its own industrial parks; while the Bank Gospodarstwa Krajowego (BGK), also under MAP, provides financial instruments for both SMEs and large enterprises and supports public-private partnerships. This fragmentation necessitates structured inter-agency collaboration to ensure policy coherence between investment promotion, SME support, and financial instruments for business development.
Poland’s institutional framework allows for diverse expertise of multiple agencies and ministries, but it requires strong inter-ministerial co-ordination to ensure policy coherence across institutions. The institutional separation of key investment and SME financing entities across different ministries poses co-ordination challenges. Such complex governance systems can increase the risks of information asymmetries, transaction costs and trade-offs and require strong inter-institutional co-ordination mechanisms to overcome potential policy silos. Poland’s approach to policy co-ordination presents a mixed picture, with established mechanisms alongside less structured processes requiring improvement. A major challenge in Poland lies in the persistent fragmentation across institutions responsible for FDI, SME, innovation, and regional development. For example, this is evidenced in the overlapping responsibilities between the Ministry of Finance and the MFPR, where both manage investment and trade promotion but with different focuses, — national economic stability versus regional development — leading to potential policy gaps. Similarly, while PAIH operates under the MRIT, other crucial investment-related agencies such as PFR, ARP, and BGK report to MAP
In Poland, collaboration across various institutions employs a blend of formal and informal mechanisms, highlighting both strengths and areas that need enhancement. Strengthening formal inter-agency communication channels could improve policy alignment and implementation efficiency. Insights from the EC/OECD Survey on Policies enabling FDI spillovers to domestic SMEs reveal that a relatively small proportion of FDI-SME policies involve collaboration among different institutions. Only 39% of such policies involve an element of collaboration in their formulation and implementation. Ministries and agencies such as the MRIT, PARP and PAIH frequently rely on informal channels to communicate and align their efforts. Regular informal meetings and working groups bring together representatives from various departments to discuss ongoing projects and policy adjustments. These interactions facilitate quick decision making and the sharing of best practices, contributing to a dynamic and responsive policy environment. However, reliance on informal mechanisms can lead to inconsistencies and a lack of accountability. Recent co-ordination efforts have also focused on the Polish Development Fund (PFR) Group, also supervised by MAP, which plays a key role in co-ordinating strategic investment initiatives. The PFR Council, which includes representatives from BGK, ARP, PARP, PAIH, and KUKE, ensures strategic policy alignment and inter-agency co-ordination across key economic development institutions.
To enhance the effectiveness of inter-institutional co-ordination, Poland could consider formalising its informal practices by establishing structured co-ordination bodies and regular inter-agency meetings with clearly defined agendas and objectives. While requiring some investment in terms of time and organisation, this would improve policy coherence and reduce redundancies across ministries and agencies. Strengthening existing inter-ministerial committees, such as expanding the mandate of the PFR Council to oversee initiatives at the intersection of investment, SME and broader industrial policy, would further reinforce these efforts. Additionally, formalising collaboration between institutions like PAIH and PARP through annual joint programming, regular meetings, and clear documentation and reporting mechanisms would ensure more structured co-ordination and prevent overlapping responsibilities.
1.4.2. Poland has made progress in stakeholder engagement, though monitoring frameworks require further enhancement
Effective stakeholder engagement is critical for the successful implementation of FDI-SME policies in Poland. The country has made notable progress in this regard, involving businesses, investors, and SMEs in the policy design and consultation processes. Platforms like legislacja.rcl.gov.pl allow for public input on draft regulations, ensuring that diverse perspectives are considered. However, challenges remain, particularly in ensuring that stakeholder input is meaningfully integrated into policy decisions. For instance, while informal consultations with experts and businesses are common, these practices could be formalised to ensure consistency and accountability across ministries and agencies. Moreover, improving the inclusivity and frequency of consultations with a broader range of stakeholders, such as local governments and regional business associations, would enhance the relevance and impact of FDI-SME initiatives. This inclusive approach would help increase compliance, strengthen trust, and ensure that policies are more aligned with the real needs of businesses and regions. Furthermore, fostering partnerships between public institutions and the academic community would provide additional capacity for rigorous policy assessment and evidence generation. Such collaboration could include joint research initiatives, academic advisory panels, and the establishment of data-sharing agreements, ensuring that public policies are better informed and aligned with the needs of local entrepreneurial ecosystems.
A critical gap in Poland’s FDI-SME policy framework lies in the limited use of systematic monitoring and evaluation (M&E) tools. While some progress has been made with tools such as regulatory impact assessments (RIA) and the SME test, these are not consistently applied across all relevant policy initiatives. For example, less than one-third of FDI-SME policies in Poland have integrated M&E frameworks, highlighting a need for more robust and systematic approaches to assessing policy outcomes. To address these gaps, it is essential to apply scientifically rigorous methods for policy evaluation, ensuring that investment and SME policies are assessed using clear, evidence-based metrics. This would allow for a more accurate measurement of their impact on FDI attraction and SME development. Strengthening these frameworks could involve better access to firm-level data to enable granular monitoring of SMEs and FDI linkages. Strengthening M&E frameworks with clear performance indicators and regular ex-post evaluations would provide critical insights into the effectiveness of FDI-SME policies, enabling evidence-based adjustments. The development of annual regulatory reports, overseen by a central regulatory review body, would also ensure accountability and help ensure that Poland’s FDI-SME policies are achieving their intended impact, supporting long-term economic growth and development.
Short-term policy actions:
These actions involve immediate or near-term steps that can be implemented relatively quickly to improve co-ordination, monitoring, and stakeholder engagement:
Strengthen inter-ministerial co-ordination: This can be achieved by undertaking joint programming and establishing structured inter-agency committees and councils with representatives from key ministries and agencies such as the Ministry of Development Funds and Regional Policy, the Ministry of Economic Development and Technology, the Polish Investment and Trade Agency (PAIH) and Polish Agency for Enterprise Development (PARP). These collaborations could be converted into formal structures with clear documentation and reporting mechanisms, to minimise inefficiencies and lack of accountability.
Implement robust monitoring and evaluation (M&E) frameworks: Systematically incorporate outcome-based M&E frameworks across all FDI-SME policies. This would involve using quantifiable outcome-based indicators tailored to the Polish context, such as the impact of FDI on SME productivity and innovation. Comprehensive data tracking and regular ex-post evaluations should be conducted in co-operation with all main data providers, of which Statistics Poland and National Bank of Poland (institutions responsible for official statistics and FDI, respectively) to assess the long-term impacts of these policies and adjust them accordingly.
Enhance Regulatory Impact Assessments (RIA): Improve RIA co-ordination across sectors and ministries by involving the Chancellery of the Prime Minister and the Ministry of Economic Development and Technology. Establish an oversight committee to ensure the quality of RIA reports, reduce regulatory burden on SMEs, and align regulations with Poland’s strategic goals. A similar model has been implemented in the Slovak Republic, where the Ministry of Economy oversees RIA quality and co-ordination across ministries.
Formalise stakeholder engagement by enhancing structured consultations with businesses, academics, and public organisations: This could involve expanding the role of bodies like the Council of Social Dialogue to ensure meaningful input into policy development, particularly in key sectors like digital innovation and sustainable energy. Strengthen collaboration with the academic community to improve evidence-based policymaking and facilitate access to firm-level data for more targeted and effective interventions.
Mid- and long-term policy actions:
These policy actions involve structural reforms and sustained policy efforts, requiring long-term planning and co-ordinated implementation to achieve their intended impact:
Consider developing a comprehensive national investment strategy: Create a unified strategy that integrates domestic and foreign investment priorities with broader economic goals. The strategy should prioritise investments that contribute to Poland’s transition to a digital and green economy, particularly in sectors such as renewable energy, high-tech manufacturing, and ICT. It should also include specific measures and policy initiatives to foster stronger linkages between foreign investors and domestic enterprises.
Develop a national SME strategy that includes a focus on building stronger linkages with FDI: The strategy should aim to enhance the capacity of SMEs to innovate, adopt new technologies, and engage in international markets. It should also prioritise improving SME access to finance, fostering digital transformation, and supporting skills development as well as incorporate an FDI component. Inspiration can be drawn from the Czech SME Strategy, which emphasises strengthening SME competitiveness through linkages with foreign investors, industry-specific collaboration platforms, and support for innovation and R&D.
Expand the role of the Polish Development Fund (PFR) Council to enhance co-ordination: Consider broadening the mandate of the PFR Council to oversee policies related to FDI-SME linkages and ensure that national strategies align with regional development needs. This will foster a unified and efficient approach to economic growth.
1.5.1. Most policy initiatives in Poland focus on the growth and upgrading of SMEs
Public policy is essential in enhancing the performance and quality of FDI-SME ecosystems. A comprehensive approach integrating policy measures across investment, SME development, innovation, and regional development within a supportive regulatory framework, can increase policy effectiveness. Such an integrated approach can strengthen the attraction of knowledge-intensive FDI and facilitate spillovers to local SMEs. The challenge lies in aligning the policy mix with the country’s economic structure, policy priorities, and geographical characteristics.
An assessment of policy initiatives across the investment, SMEs, innovation and regional development areas shows that Poland’s policy mix primarily aims to strengthen the innovation performance of domestic SMEs (62% of policy initiatives) (Figure 1.10, Panel A). These policies are designed to improve the ability of smaller firms to recognise and utilise new knowledge, emphasising access to finance, skills, innovation, and strategic resources. Although to a lower extent, several initiatives, including financial incentives and facilitation services, are also in place to attract knowledge-intensive investments, particularly in technology-intensive sectors and R&D activities, while encouraging investments in less-developed regions through cluster development initiatives. Approximately 26% of policies focus on connecting foreign investors with domestic SME suppliers (i.e. “value chain linkages”), which is crucial for the diffusion of knowledge, technology and skills from foreign to domestic firms (Figure 1.10,Panel B).
% of mapped policies measured
Note: Shares are calculated as a % of the total of national initiatives in place. Total may be higher than 100% when policy initiatives respond to several policy objectives at the same time.
Source: Experimental indicators based on EC/OECD Survey of Institutions and Policies enabling FDI-SME Linkages (2023).
The majority of policy initiatives target specific types of firms (e.g. SMEs, start-ups), priority sectors, value chains, and geographic areas (Figure 1.11, Panel A). A high degree of selectivity is consistent with industrial and innovation policy frameworks aimed at smart specialisation, and with current development thought about the role of targeted policy interventions in designing industrial policies for sustainable growth. In Poland, the targeting of SMEs and non-corporate entities (e.g. universities, R&D organisations) is widespread among government agencies (Figure 1.11, Panel C). Sectoral targeting focuses mostly on FDI-intensive manufacturing sectors such as the automotive, electronics, and ICT industries; however many policy initiatives introduced in recent years have shifted their focus to the services sector, which provides opportunities for significant productivity gains (see Chapter 2). Regarding the targeting of less developed regions, there is room to further integrate place-based approaches into policymaking, in particular for programmes financed by the state budget.
Note: Panel A: Shares of generic and targeted policies as a percentage of the total 64 policies mapped. Panel B: Shares of policies by target type, as percentage of total targeted initiatives (55). As policies can be directed at more than one type of target, the sum is above 100%. Panel C: Shares of policies by type of population targeted, as percentage of total population-targeted policies (44). SMEs-targeted policies include initiatives applying to SMEs only or providing preferential conditions to them. Other non-corporate entities include investors (business angels, venture capitalists or VC funds, banks, financing institutions, etc.); universities; research organisations; entrepreneurs; individuals with specific roles or skillsets (e.g. managers, highly skilled, researchers); government institutions and sub-national governments (e.g. municipalities); and others. Panel D: Shares of policies by type of domiciliation targeted, as percentage of total domiciliation-targeted policies (30). It demonstrates distribution of policies specifically targeting domestic or foreign firms.
Source: EC/OECD Survey of Institutions and Policies enabling FDI-SME Linkages (2023).
1.5.2. Regulatory burden has decreased, though restrictions in services and barriers to intellectual property rights continue to challenge FDI and SME growth
The effectiveness of the wider regulatory framework shapes the spillover potential of FDI and the capacities of local SMEs to absorb new knowledge and technology. Factors such as openness to foreign investment, fair competition rules, the protection of intellectual property rights, and a labour market policy regime that facilitates the mobility of skilled workers are essential prerequisites for economies to realise the benefits of FDI and SMEs.
Poland remains moderately open to FDI, although certain market access restrictions persist. The OECD FDI Regulatory Restrictiveness Index (FDIRRI) indicates that Poland is slightly more restrictive than the OECD average, particularly in sectors such as real estate, transport, and media, where foreign ownership limitations are more pronounced. These barriers can deter foreign investment and reduce the potential for spillovers to domestic firms in these sectors (OECD, 2021[5]). Additionally, Poland has relatively high restrictions on trade in services, driven by regulations such as labour market tests and authorisation requirements for foreign land acquisition. These regulations can affect the degree of local embeddedness of foreign affiliates and the potential for supply chain linkages with domestic enterprises not only in industries where FDI gains access but also in downstream sectors. Reducing policy barriers to services trade could enhance the performance of service sectors in both domestic and international markets (Benz et al., 2023[6]).
Poland performs better than most OECD economies in terms of regulatory barriers to competition. According to the OECD Product Market Regulation (PMR) indicators, which measure the degree to which laws and policies promote or inhibit competition, regulatory barriers are below the OECD average and have significantly decreased over the past decade. Poland performs particularly well with regard to regulatory impact evaluations and administrative burden on business, reflecting sustained efforts in recent years to streamline business registration procedures and lower associated costs for entrepreneurs. Recent reforms, including the implementation of the one-stop-shop (EKRS) and the establishment of the SME Ombudsperson, have streamlined administrative processes, but further policy adjustments are needed to enhance Poland’s attractiveness for foreign investors and improve the business environment. Policy emphasis could be placed on addressing potential distortions induced by public ownership, and streamlining the insolvency regime, which continues to pose challenges for new firms.
Facilitating innovation spillovers from FDI requires targeted policy interventions to promote the protection and use of intellectual property rights in Poland. While a comprehensive legal framework is in place, the use of IP rights among Polish firms remains low. This indicates not only low levels of innovation in key sectors but also a lack of awareness among businesses—especially SMEs—about the strategic importance of IP protection in enhancing their firm’s capacity to engage in innovation-based collaborations. High costs associated with IP protection, including application fees, patent attorneys, and litigation costs, further exacerbate the problem, particularly for SMEs and academic researchers. These structural challenges, if left unaddressed, could continue to impede Poland’s efforts to harness IP as a key driver of innovation and economic growth.
Poland has a balanced legal framework for employment protection, aligning job security with labour market flexibility. The country’s employment protection for regular and temporary workers is on par with the OECD average, with recent reforms tightening rules on fixed-term contracts and enhancing worker rights. These reforms include a requirement for employers to justify terminations and, in some cases, consult with trade unions. Poland has also formalised regulations for remote and hybrid work, providing employers with more flexible work arrangements. Efforts to reduce the overuse of temporary contracts since 2016 have contributed to a reduction of 0.9 million temporary jobs by 2021. Strengthening permanent employment can enhance firms' willingness to invest in employee training, a key factor in firm productivity and absorptive capacity. Labour mobility, essential for FDI-SME spillovers, remains a challenge due to the limited absorptive capacity of local SMEs, though recent initiatives to attract foreign workers, particularly from Ukraine, aim to address skill shortages in FDI-intensive sectors.
1.5.3. The impact of investment incentives could be further evaluated and access to business support schemes streamlined for Polish SMEs
PAIH focuses on attracting high-value-added and knowledge-intensive investments, particularly in the manufacturing (e.g. electronics, pharmaceuticals, automotive) and telecommunications (e.g. digital services) sectors and in activities involving R&D. Although, PAIH uses key performance indicators to identify and prioritise investments that contribute to innovation, job creation, and skills development, the establishment of an overarching national investment promotion strategy could provide the agency with more organised structure and co-ordination mechanisms to target quality investments.
Financial incentives, such as grants, loans, and tax relief, are also key instruments used by the Government of Poland to attract knowledge-intensive FDI. The take-up of incentives provided under the Polish Investment Zone (PIZ) regime and the Programme for Supporting Investments of Significant Importance has increased over the past few years, resulting in increased investment volumes by large firms –many of them foreign– and an increasing number of jobs created in high-tech sectors. While incentives may help direct certain investment projects towards higher value-added activities, they can also bring negative consequences in terms of revenue forgone and economic distortions. The Government of Poland could consider undertaking regular evaluations of incentive programmes to ensure that their targeting and design remains effective.
Overall, government support for business R&D in Poland remains below the OECD and EU averages, representing 0.148% of GDP, with Poland ranking lower than top innovators such as the US, Canada, and France. However, support has steadily increased since 2006 at a faster rate than in many OECD economies. Currently, 23% of public support for R&D comes from tax relief, with direct grants and loans accounting for 77%, contrasting with the OECD area where tax incentives form a larger share (58%). Poland offers a comprehensive R&D tax relief system that allows deductions of up to 200% of eligible R&D expenses. While the tax incentive applies equally to SMEs and large firms, SMEs face greater challenges in navigating the application process. In 2023, Poland had the second-highest implied tax subsidy rate on R&D among OECD economies, highlighting the country’s effort to reduce R&D costs, though the system’s complexity remains a barrier for smaller firms. Adjustments similar to those seen in France, where SMEs benefit from higher rates and faster cash refunds, could make the Polish system more accessible to smaller firms.
Policies that aim at enhancing the productive and innovative capacities of SMEs predominantly centre around financial support schemes and technical assistance, closely aligning with practices observed in peer OECD countries. The Polish Agency for Enterprise Development (PARP) administers a range of programmes designed to improve SME performance, including grants for innovation, consulting services, mentoring programmes, and online training platforms. The National Centre for R&D (NCBR), the Polish Development Fund (PFR) and National Development Bank (BGK) also provide grants and loans to help SMEs diversify their activities and expand into innovative industries, adopt new technologies and improve their managerial capacities. While this is a comprehensive system of business support, SMEs often deal with administrative burden in their effort to benefit from the various support schemes. Streamlining access to technical support and increasing awareness of these programmes, for instance through one-stop-shops, could help facilitate SME access to business support.
Supplier linkages and strategic partnerships between foreign investors and domestic SMEs are primarily supported through PAIH’s investment facilitation services. For large investment projects, PAIH organises meetings with local business support organisations and compiles lists of potential suppliers based on the specific needs of foreign multinationals. However, practically, matchmaking services between foreign multinationals and local suppliers are primarily delivered by regional IPAs, where disparities in the quality and co-ordination of investment facilitation services can affect their effectiveness. Initiatives like PAIH's export training and financial support through PARP and BGK help SMEs enter international markets but are insufficient to build strong domestic supplier capacities in line with foreign investors' needs. Strengthening investment facilitation through better regional co-ordination, training, and the use of online platforms, such as trade.gov.pl, could further enhance local supplier linkages. Poland could also enhance these efforts by implementing a supply chain development programme, inspired by Portugal's Supplier Clubs model, which includes matchmaking, business consulting, and EU-funded financial support to help SMEs upgrade and integrate into the supply chains of multinational enterprises (MNEs).
Short-term policy actions:
These actions focus on improving the efficiency and accessibility of existing support systems, simplifying administrative procedures, and enhancing coherence across investment and SME policies:
Enhance investment facilitation and aftercare services to embed foreign affiliates in local economies and encourage the use of domestic suppliers. PAIH could expand its support by focusing on supplier linkages, identifying sourcing needs, and directing FDI projects to regions with high potential for local partnerships. Strengthening co-ordination with regional IPAs through matchmaking events, supplier databases, and business fairs could further enhance integration. The trade.gov.pl portal, which already lists Polish enterprises along with their products and services, should be further utilised and integrated into PAIH’s investment facilitation efforts to enhance these initiatives. Additionally, PAIH should offer training to regional authorities to standardise services and improve investment facilitation, particularly in lower-capacity regions.
Strengthen inter-agency collaboration to further enhance the accessibility of existing support packages that integrate business development, internationalisation, and innovation-funding services for SMEs. While programmes such as the European Funds for a Modern Economy (FENG) provide a comprehensive and tailored set of tools for companies at different stages of development, ensuring that SMEs across various sectors and maturity levels can fully navigate and benefit from available support remains key. Although PARP receives a high number of applications, uptake across the full range of available business advisory services could be further optimised by simplifying application processes where feasible and continuing to refine targeted awareness campaigns to reach specific SME segments more effectively.
Continue efforts to simplify access to R&D support for SMEs. While Poland’s R&D tax relief system is comprehensive, SMEs face challenges in navigating the application process, limiting their ability to benefit from available support. Tax relief accounts for only 23% of public R&D funding, compared to the OECD average of 58%, with the remaining support coming from direct grants and loans. Enhancing access to information, simplifying procedures, and introducing SME-specific incentives—such as faster refunds and higher rates, as seen in other OECD countries—could make R&D support more accessible for smaller firms.
Simplify IP protection procedures and promote the use of IP rights among SMEs. While Poland has made progress in recent years, the use of IP rights among Polish firms, in particular SMEs, remains low. High costs associated with IP protection, including application fees and legal processes, as well as slow patent examination procedures, are key barriers to broader IP use. Targeted reforms should focus on lowering these costs, simplifying procedures, and promoting the valorisation of IP held by universities and research centres.
Mid- and long-term policy actions:
These actions aim to build mechanisms to assess the effectiveness of investment incentives, enhance supply chain integration, and strengthen workforce capabilities to improve long-term competitiveness and resilience:
Undertake regular impact evaluations of investment incentives to ensure their effectiveness in attracting knowledge-intensive FDI. While Poland’s investment incentives are being used by an increasing number of foreign multinationals and have managed to direct certain investments towards high-tech sectors and R&D activities, regular independent evaluations are necessary to ensure they continue to meet their goals and their net benefits outweigh the costs, such as revenue forgone and potential economic distortions. Periodic reviews would ensure that incentives remain relevant and aligned with Poland’s economic priorities.
Develop local supply chain capacities to better integrate SMEs into the supplier networks of foreign multinationals. While initiatives like export training and trade finance help SMEs enter international markets, they do not sufficiently strengthen domestic supply chain capabilities. Aligning local supplier standards with the needs of foreign multinationals requires targeted support, including certification and accreditation. Implementing a supply chain development programme, such as Portugal’s Supplier Clubs model, could further assist SMEs in upgrading their technological capacities and foster partnerships with foreign investors.
Further enhance access to upskilling and reskilling programmes for SMEs, building on ongoing sector-specific initiatives. Poland has a strong policy framework for workforce skills development, and PARP’s sectoral councils are actively tailoring training programmes to industry needs. As these efforts expand to cover 27 identified sectors, ensuring that SMEs across all regions and levels of digital readiness can fully participate remains key. Increasing the availability of flexible, modular training formats (e.g. online and hybrid courses) and strengthening outreach efforts could further support SME engagement, particularly in digital and knowledge-intensive industries where demand for skills is rapidly evolving.
Poland’s institutional framework for investment and SMEs grants regional and local authorities considerable responsibilities for shaping economic development. This model recognises that a place-based approach can adjust national policies to reflect the industrial structures, workforce skills, and investment conditions found in each voivodeship. Certain regions such as Mazowieckie and Dolnośląskie have leveraged this decentralisation effectively, supporting innovation-driven sectors and creating dynamic ecosystems for both foreign investors and local SMEs. In contrast, other regions, particularly in eastern Poland, face persistent obstacles, including weaker infrastructure, fewer skilled workers, and limited linkages between foreign affiliates and domestic enterprises.
Although decentralisation has helped policymakers account for local specificities, regional agencies responsible for investment promotion and SME support often struggle with fragmented responsibilities and resource constraints. Special Economic Zones (SEZs) illustrate these differences. While they were established to incentivise private sector activity in less developed areas, their impact is uneven, reflecting both limited capacities for strategic co-ordination and disparities in institutional support. In addition, overlapping responsibilities among national, regional, and local entities can produce inefficiencies or conflicting mandates, leading to difficulties in translating national policy intentions into coherent regional-level programmes. There is room for improvement in the adaptation of national policy goals to the realities of local economies, especially in those areas that do not attract large-scale or knowledge-intensive investments.
While national strategies such as the Strategy for Responsible Development emphasise territorial cohesion and sustained economic growth, they do not always include detailed mechanisms for leveraging FDI and SMEs in support of regional economic conditions. Similarly, the National Smart Specialisation Strategy identifies priority sectors and technological domains, but clearer guidance on how regional authorities can align investment incentives and SME support policies with those areas would be beneficial. A more co-ordinated approach, one that ties FDI attraction and SME development directly to regional specialisations and innovation ecosystems, could help ensure that national measures produce tangible outcomes across regions. Given the variation in regional economic conditions, many observers point to the need for more place-sensitive policies within initiatives such as the Polish Investment Zone (PIZ) programme. Although the 2018 reform of the PIZ programme extended SEZ-type incentives nationwide, there is still scope to refine its design and align these benefits with broader regional development goals. Systematic evaluation of the cost-effectiveness of regional investment incentives remains essential, so that public resources address persistent economic gaps rather than simply redistributing them without lasting impact. Complementary policies that focus on infrastructure improvements, including better digital connectivity, could also help less developed regions become more competitive for FDI projects.
Strengthening the capacity of regional and local institutions is a central element in attracting and retaining foreign investors. Capacity gaps among regional agencies remain significant. While some voivodeships (e.g. Silesian, Mazowieckie) possess robust investment promotion entities and established industry clusters, others—particularly in eastern Poland—often rely on smaller, less-resourced agencies. Enhancing their institutional readiness could help align local needs with national FDI-SME strategies. This involves helping local agencies develop the expertise to handle investment promotion, match investors to local supplier networks, and co-ordinate effectively with national institutions. Enhanced co-operation between ministries and regional institutions can also enable targeted interventions, such as tailored support for workforce training or technology transfer, ensuring that FDI projects and associated supply chains deliver benefits beyond major urban centres. Better integration of FDI into local economies should contribute to more balanced growth, provided that each region is equipped with the necessary infrastructure, skilled workforce, and supportive institutions to make the most of these opportunities.
Short-term policy actions:
These actions focus on improving the operational effectiveness of multilevel governance frameworks, enhancing co-ordination with regional authorities, and addressing immediate regional development challenges:
Enhance the effectiveness of the Polish Investment Zone reform: Building on the 2018 reform that extended SEZ incentives across the entire country, increase targeted support for underdeveloped regions such as Warmińsko-Mazurskie and Świętokrzyskie, where unemployment is high and FDI levels are low. Adjust incentive levels to ensure that regions with greater needs receive higher benefits. Introduce Monitoring and Evaluation (M&E) frameworks to assess the impact of incentives on regional development and make necessary adjustments to maximise effectiveness.
Establish a centralised co-ordination mechanism for the management and strategic oversight of Special Economic Zones (SEZs): to ensure a seamless transition from the traditional SEZs to a unified Polish Investment Zone (PIZ) framework by 31 December 2026. A centralised co-ordination body would oversee the integration of SEZs into the PIZ, harmonise investment policies across regions, and ensure consistent application of incentives nationwide. Drawing inspiration from co-ordinating mechanisms such as Indonesia's National Council for Special Economic Zones, which co-ordinates multiple ministries to streamline SEZ policies and benefits, such a mechanism could bring together key stakeholders from MRIT, PAIH and regional authorities.
Strengthen the capacities of Regional Development Agencies: by providing tools and training to manage FDI-SME linkages and ensure vertical co-ordination between national and regional levels. This will support balanced regional development and help address disparities. To account for the independent financial goals of many regional entities, co-ordination efforts should be voluntary and incentive-driven, focusing on structured information-sharing, best practice exchange, and capacity building rather than formal regulatory mandates.
Develop regional branding strategies co-ordinated with national investment promotion: Launch comprehensive branding campaigns for regions such as Warmińsko-Mazurskie, highlighting local success stories and quality of life improvements to reshape investor perceptions and attract FDI.
Mid- and long-term policy actions:
These actions involve structural reforms and capacity-building efforts to enhance regional competitiveness and foster long-term growth through innovation and infrastructure improvements:
Attract and retain talent to support FDI growth: Implement strategies to address labour shortages and youth migration in regions like Lubelskie and Podlaskie. Tailor vocational training and upskilling initiatives to meet investor needs while also boosting local employment, reducing out-migration, and supporting long-term regional development. Facilitate the integration of Ukrainian refugees into the labour market to address skill gaps, particularly in less-developed regions. Consider positioning regions near the Ukrainian border as hubs for post-aggression reconstruction efforts, attracting investment in logistics and supply chain sectors.
Promote inter-firm collaboration and triple helix partnerships (university-industry-government) in local entrepreneurial ecosystems: Expand successful innovation models, such as those in Wrocław and Gdańsk, to other regions like Lubelskie. Encourage academic and industrial collaboration through dedicated R&D funding and incentives for joint projects. Establish local industry-specific innovation hubs that connect SMEs, large firms, and research institutions to foster technology transfer, taking inspiration from Ireland’s 'Technology Gateways' programme (Enterprise Ireland, 2020[7]).
Maximise brownfield site development: Launch a national brownfield regeneration programme to unlock the potential of over 600 sites across Poland as part of a broader strategy to attract private investment (including FDI) into these areas. The programme should be carefully designed, with flexible financial and tax incentives that can be considered as part of a broader mix of tools to attract private investment. Additionally, empower local governments with the resources and regulatory support necessary to facilitate site redevelopment, ensuring that local conditions and strategic priorities are taken into account in project planning.
Improve local infrastructure using blended financing models: Invest in road and rail infrastructure, including maintenance, in underdeveloped regions such as Warmińsko-Mazurskie and Podlaskie to enhance their attractiveness for investors. Financing could be achieved through EU structural funds, public-private partnerships, and municipal bonds. Poland could draw inspiration from Germany’s 'Infrastructure Acceleration Act' to streamline project approvals and encourage private sector participation (BMVI, 2023[8]).
References
[14] Alfaro, L. and M. Chen (2012), “Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance”, American Economic Journal: Economic Policy, Vol. 4/3, pp. 30-55, https://doi.org/10.1257/pol.4.3.30.
[6] Benz, S. et al. (2023), “Right here, right now? New evidence on the economic effects of services trade reform”, OECD Trade Policy Papers, No. 271, OECD Publishing, Paris, https://doi.org/10.1787/1159657f-en.
[8] BMVI (2023), Germany’s ’Infrastructure Acceleration Act’, https://www.bmvi.de/EN/Home/home.html.
[7] Enterprise Ireland (2020), Ireland’s ’Technology Gateways’ Programme, https://technologygateway.ie/.
[13] Helpman, E., M. Melitz and S. Yeaple (2004), “Export Versus FDI with Heterogeneous Firms”, American Economic Review, https://scholar.harvard.edu/files/melitz/files/exportsvsfdi_aer.pdf.
[2] Javorcik, B. and M. Spatareanu (2011), “Does it matter where you come from? Vertical spillovers from foreign direct investment and the origin of investors”, Journal of Development Economics, Vol. 96/1, pp. 126-138, https://doi.org/10.1016/j.jdeveco.2010.05.008.
[15] Johanson, J. and J. Vahlne (1977), “The internationalization process of the firm - A model of knowledge development and increasing market commitments”, Journal of International Business Studies, Vol. 8/1.
[1] OECD (2023), Policy Toolkit for Strengthening FDI and SME Linkages, OECD Publishing, Paris, https://doi.org/10.1787/688bde9a-en.
[5] OECD (2021), OECD Investment Policy Reviews: Thailand, OECD Investment Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/c4eeee1c-en.
[9] OECD (2021), OECD SME and Enterpreneurship Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/97a5bbfe-en.
[12] OECD (2020), Enabling FDI diffusion channels to boost SME productivity and innovation in EU countries and regions: Towards a Policy Toolkit, Concept Paper for joint EC-OECD project..
[3] OECD (2019), OECD Analytical Activity of Multinational Enterprises (AMNE) database, http://www.oecd.org/sti/ind/analytical-AMNE-database.htm.
[10] OECD (2019), “Portugal”, in OECD SME and Entrepreneurship Outlook 2019, OECD Publishing, Paris, https://doi.org/10.1787/d2b72934-en.
[11] OECD (2018), Promoting innovation in established SMEs, OECD SME Ministerial Conference, Mexico City, Policy Note, 22-23 February 2018, http://www.oecd.org/cfe/smes/ministerial/documents/2018-SME-Ministerial-Conference-Parallel-Session-4.pdf.
[4] World Bank (2022), Enterprise surveys, https://www.enterprisesurveys.org/en/enterprisesurveys.
FDI is an important source of finance for developed and developing countries and can play an important role in supporting a resilient and sustainable recovery from the COVID-19 crisis. Harnessing FDI for sustainable development, and particularly productivity and innovation, requires strong linkages with small and medium-sized enterprises (SMEs) in host countries. Foreign multinational enterprises (MNEs) do not just choose countries but locations in specific sub-national regions, and hence, FDI-SME linkages need to be considered and strengthened through place-based approaches.
SMEs contribute significantly to economic growth and social inclusion, and they can also play a key role in building resilience and more sustainable growth during the post COVID-19 recovery. In the OECD area, SMEs account for almost all enterprises, about two-thirds of total employment and 50-60% of value added (OECD, 2021[9]). To achieve their full potential, SMEs need to increase productivity and scale up innovation capacity. They are often less productive and innovative than larger firms where size is often identified as a major barrier to higher performance. Yet, some SMEs can be more productive and innovative than large firms, signalling that size is no fatality. In digital-intensive sectors, for example, smaller firms can show higher productivity levels (OECD, 2019[10]). SMEs play a key role in shifting innovation models by adapting supply to different contexts or user needs and responding to new or niche demand (OECD, 2018[11]).
Changes in the global trading and investment environment offer new opportunities for SME upgrading. Participation in global value chains (GVCs) enables SMEs to enhance productivity by absorbing technology and knowledge spillovers, upgrading workforce and managerial skills and raising innovation capacity (OECD, 2018[11]). This can be achieved by linking their business activities with foreign affiliates of MNEs (and domestic owned companies) and/or by directly integrating in GVCs as exporters, i.e. by supplying companies located abroad.
In this context, beyond the contribution to capital investment and employment generation, FDI can play an important role for knowledge and technology spillovers in host economies, resulting in increased productivity of local firms, especially SMEs. While productivity and innovation capacity of SMEs are influenced by a variety of market, policy and other factors (OECD, 2019[10]; OECD, 2021[9]), this report focuses on the specific role of FDI and related policies in Poland. This introductory chapter introduces the conceptual framework to assess FDI spillovers on domestic SMEs and outlines how this framework is implemented for the case of Poland (OECD, 2020[12]).
Spillovers from FDI on domestic SMEs depend on a set of main enabling factors:
Potential for FDI spillovers: FDI spillovers are possible as foreign firms are often more productive than domestic ones. Foreign MNEs are often larger than domestic firms, where size is found to be associated with higher productivity and a key determinant to overcome fixed costs for investment abroad (Helpman, Melitz and Yeaple, 2004[13]). Affiliates of foreign firms – through their links with parent companies – have typically greater access to technology, better managerial skills and more adequate resources for capital investment than domestic firms (Alfaro and Chen, 2012[14]). These capacity differences between foreign and domestic firms make it possible for SMEs to benefit from knowledge and technology transfers. The potential for FDI spillovers is further influenced by the volume of FDI inflows (i.e. the economy’s relative dependence on FDI) and a number of FDI characteristics that illustrate to what extent FDI is effectively embedded in the local economy. These characteristics include (a) the sector in which the investment occurs and the activities that the foreign company undertakes, (b) the main motivations behind the FDI decision (e.g. market-seeking, resource-seeking, asset-seeking, efficiency-seeking), (c) the type of FDI (e.g. greenfield versus mergers and acquisitions), (d) the country of origin of the foreign investor, including the geographical and cultural proximity to the receiving country and the degree of foreign ownership.
Absorptive capacities of domestic SMEs: Absorptive capacity refers to the ability of a firm to recognise valuable new knowledge and integrate it productively in its processes, i.e. to innovate (OECD, 2021[9]; 2019[10]). The stronger its absorptive and innovative capacity, the higher its chances to benefit from FDI. SME absorptive capacity depends on the firm’s prior capital endowment and level of productivity, i.e. its level of financial, human and knowledge-based capital and its efficiency in creating value from it. Beyond existing endowments of these resources, absorptive capacity also depends on SMEs’ ability to access strategic assets related to finance, skills and innovation as well as on the broader business environment. Not all SMEs are the same and their heterogeneity greatly contributes to explain their performance. SMEs vary in terms of age, size, business model, market orientation, sector and geographical area of operation. This means that different types of SMEs have different growth trajectories and therefore different chances to enter into knowledge sharing relationships with foreign multinational enterprises (MNEs) and to benefit from FDI spillovers.
Economic geography factors: This refers to geographical and cultural proximity factors, where the latter is defined by factors such as the differences between home and host countries in terms of language, culture, political systems, level of education, and level of industrial development (Johanson and Vahlne, 1977[15]). The localised nature of FDI means that geographical and cultural proximity between foreign and domestic firms affects the likelihood of knowledge spillovers, which often involve tacit knowledge, and whose strength decays with distance. Thus, productivity spillovers from FDI on local firms are often concentrated in the same region of the investment. Agglomeration effects, notably through the presence of local industrial clusters, have also been reported to affect FDI attraction and FDI spillovers. Clusters embed characteristics such as industrial specialisation (through specialised skilled workers and suppliers) and geographical proximity that make knowledge spillovers more likely to happen, including from MNE operations.
Other economic and structural characteristics of the host country: The degree to which FDI-SME spillovers materialise also depends on other economic and structural characteristics of the host country and its sub-national regions. These factors relate to the regional/national endowment as well as the macro-economic context, structure of the economy, sectoral drivers of growth, productivity and innovation as well as to the level of integration in the global economy, beyond FDI. These factors are often necessary conditions for FDI spillover potential, SME absorptive capacity and economic geography factors to turn into actual productivity gains for domestic SMEs.
While adequate enabling conditions are necessary, FDI spillovers only occur if domestic SMEs are exposed to MNE activities. Such exposure may occur through a set of diffusion channels:
Value chain linkages involve knowledge spillover from foreign MNEs to suppliers (upstream) and customers (downstream). Linkages help domestic companies extend their market for selling and raise the quality and competitiveness of their outputs. They can also generate knowledge spillovers when MNEs require better-quality inputs from local suppliers, particularly SMEs, and are therefore willing to share knowledge and technology with domestic companies to encourage their adoption of better practices.
Strategic partnerships involve knowledge and capacity transfer in formal collaborations, for example in the area of R&D or workforce/managerial skills upgrading. These partnerships can take many 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.
Labour mobility can be an important source of knowledge spillovers in the context of FDI, notably through the move of MNE workers to local SMEs – either through temporary arrangements such as detachments or long-term arrangements such as open-ended contracts – or through the creation of start-ups (i.e. corporate spin-offs) by (former) MNE workers. Firms established by MNE managers are often more productive than other local firms. Similarly, workers who moved from foreign-owned to domestic firms retain skills and competences, including management skills, acquired in the foreign firms and thus contribute more to the productivity of their firm than workers without foreign firm experience.
Competition effects occur with the entry of foreign firms, which heightens the level of competition on domestic companies and puts pressure on them to become more innovative and productive – not least to retain skilled workers. The new standards set by foreign firms – in terms of product design, quality control or speed of delivery – can stimulate technical change, the introduction of new products, and the adoption of new management practices in local companies, all of which are possible sources of productivity growth. This rising competitive pressure due to foreign firm entry and related productivity spillovers may also be associated with new incentives for workers to improve skills and SMEs to engage in skills upgrading.
Imitation effects occur when foreign firms can also become a source of emulation for local companies, for example by showing better management practices. Imitation, reverse engineering and tacit learning can therefore become a channel to strengthen enterprise productivity at the local level. Foreign firms may also participate in innovation clusters and collaborative innovation activities where cross-fertilisation of ideas can increase productivity, both of domestic and foreign firms.
The scope for productivity and innovation spillovers on domestic SMEs is ultimately determined by the interaction of enabling factors and diffusion channels. Public policies aiming to enhance these spillovers address these different aspects and cut across a range of policy domains, including investment policy and promotion, SME development, innovation and regional development.
Source: OECD (2023[1]), Policy Toolkit for Strengthening FDI and SME Linkages, https://doi.org/10.1787/688bde9a-en.