The global economy has suffered several shocks in a row due to the COVID-19 crisis and Russia’s war in Ukraine. In their wake, global value chains (GVCs) have experienced major disruptions, and business conditions have tightened, with consequential impacts on firms, people and places. Against a backdrop of environmental challenges, but also other megatrends, such as the digital transition and demographic changes, there is stronger pressure than ever for more resilient, sustainable and inclusive growth.

Boosting productivity and innovation will be key, not least among SMEs, where, across OECD economies, significant gaps exist with their larger peers, in particular foreign owned firms. However, foreign direct investment (FDI) serves as a source of knowledge and capital, and so, there is considerable scope to leverage on the potential to reinforce SME-FDI linkages as a driver of productivity and innovation, including through knowledge spillovers, that benefit both SMEs and MNEs.

Seizing on that potential requires the right enabling frameworks, and, in particular, supportive business and policy conditions, including multi-level governance, that can both leverage on existing FDI and attract new quality FDI, whilst also improving SME performance and capabilities, and local ecosystem. The OECD with support of the European Commission (EC) is conducting a multi-year project to advise national and subnational governments on strengthening and developing FDI-SME ecosystems to drive resilient, sustainable and more inclusive growth.

This report is the second country assessment produced as part of that project. It provides a comprehensive review of the potential and conditions of productivity and innovation spillovers between FDI and SMEs in the Slovak Republic. It presents the institutional and policy environments that support FDI-SMEs ecosystems and identifies concrete areas of reforms at both national and regional levels to strengthen these linkages.

Chapter 1 presents the conceptual framework developed for the project and country assessments. It is abridged from Strengthening FDI-SME ecosystems and spillovers. A Policy Toolkit that synthesises early findings of the pilot phase.

Chapter 2 analyses the potential for FDI spillovers in the Slovak Republic, the absorptive capacities of local SMEs, and how broader economic and business conditions can enable FDI-SME linkages and spillovers.

Chapter 3 proposes a diagnostic of the effectiveness of FDI-SME linkages in the Slovak Republic, and innovation diffusion through value chains, strategic partnerships, labour mobility, and competition and imitation.

Chapter 4 looks at the Slovak institutional and public governance framework for enhancing FDI-SME linkages, including aspects related to multi-level coordination, policy evaluation and stakeholder engagement.

Chapter 5 analyses the Slovak policy mix for FDI-SME linkages, identifies possible blind spots and inconsistencies, and proposes a number of areas for policy improvements.

Chapter 6 gives a regional lens to the report by providing an additional assessment of two regions: Banská Bystrica and Košice.

The report was jointly developed by the OECD Committee on SMEs and Entrepreneurship and the OECD Investment Committee and contributes to their respective Programmes of Work. The report was approved by written procedure by the two Committees on 21 September 2022 [COM/CFE/DAF(2022)1].

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