Spatial distribution of the top 500 companies on regional and county levels in Hungary – a repeated analysis Mariann Szabó The aim of this research is to investigate how the Budapest University spatial distribution of 500 companies with best of Technology and Economics, sales performance has changed since 2014 in Department of Environmental Hungary. Thus, the analysis elaborated by Csete– Economics Szabó (2014) is repeated. Subsequent to the anal- E-mail: [email protected] ysis, the change in performance of enterprises on a regional level is linked to economic polarisa- Keywords: tion: the sharply widening inequality of income regional development, and wealth. In order to provide a broader view agglomeration economies, on the Hungarian economy, the article evaluates assessment of enterprises with the effect of the allocation of development funds best sales performance, for the 2007–2013 programming period as the export, development funds have a dominant role form- sub-national scale ing the income generation patterns of the coun- try. The primary research consists of an analysis on the change in the number and total (gross) sales value of the top 500 companies (companies with the best sales performance in a specific ref- erence year) on NUTS 2 and NUTS 3 levels. Moreover, it demonstrates the sectoral diversity of regions and interprets the concrete enterprise ranking in the case of the first quarter, reflecting the five most dominant regions that have the largest share in the total (gross) sales value among the top 500 companies. Finally, the rela- tion of changes in gross value added (GVA)/capita and in total (gross) sales value of the top 500 companies is interpreted. The results of the research indicate that the spatial distribu- tion of the 500 companies with best sales per- formance is in perfect accordance with the gen- erally accepted regional inequalities’ pattern of the country, which is due to the location choice of the export-oriented companies. If we consider Regional Statistics, Vol. 7. No. 2. 2017:148–170; DOI: 10.15196/RS070208 Spatial distribution of the top 500 companies on regional and county levels 149 in Hungary – a repeated analysis the headquarters of the enterprises, 78% from the total sales value of the top 500 companies is linked to five NUTS 3 regions, and the im- portance of the capital is outstanding. The result of the research indicates the importance of ag- glomeration economies, which is the result of interaction among economies of scale, transpor- tation costs, market size, and information as Paul Krugman (1991) explains in the ‘new economic geography’ theory. The repeated analysis has in- dicated that both the total (gross) sales value of the top 500 companies (by 15%) and GVA/capita (by 19.5%) have increased during the period, and the ranking of NUTS 2 regions has not changed. Thus, the changes in gross do- mestic product (GDP)/capita and in the total sales value of the top 500 companies on NUTS 3 level have common tendencies. Considering the cumulative share of the total (gross) sales value of the top 500 on a regional level, the inequalities have marginally decreased, but large differences still exist. Introduction Currently, we face the increasing role of transnational companies in the global economy. At times, it is threatening that factors which influence economic devel- opment (capital flow among countries, delocalisation of international enterprises, remittances) are not under the control of governments (Csete–Szabó 2014, Shera– Meyer 2013), thus the long-term resilience of regions is highly affected by the loca- tion choice of global or transnational companies led by specific management groups. Nevertheless, different trade or economic unions, and local economic de- velopment initiatives are of high importance in raising the attractiveness of locations and enhancing development. While the entry of new enterprises and broadening production triggers economic development immediately, the policies for decreasing regional inequalities may require a longer period to influence the wealth of regions. Hungary became a member state of the European Union (EU) in 2004 and through the system of the 4 freedoms and access to EU funds, it gained the opportunity to promote economic development and strengthen economic, social, and territorial cohesion. Between 2007 and 2013, Hungary received 7,849.2 billion Hungarian Forint (hereinafter HUF) for development purposes. From 2014, several ex post evaluations have been undertaken assessing the effectiveness of the development Regional Statistics, Vol. 7. No. 2. 2017:148–170; DOI: 10.15196/RS070208 150 Mariann Szabó funds. Regarding the effectiveness of funds, it could be stated that the cohesion purpose of the regional policy was less successful and the territorial differences have continued to exist among the regions. In 2014, Csete and Szabó conducted a research on how the Hungarian top 500 companies affect regional development, an examination of income generation at sub-national scale. The research results have indicated that the spatial distribution of the 500 companies with best sales performance is in perfect accordance with the generally accepted regional inequalities’ pattern of the country: the hegemony of the capital, increasing differences between the capital and rural areas, emergence of the ‘West–East decline’, variant development patterns of microregions and settlements (Dusek–Lukács–Rácz 2014, Nemes Nagy–Tagai 2011, Obádovics 2013, Pénzes 2012). Assessing the regional disparities in the country on NUTS 2 level, Dusek– Lukács–Rácz (2014) explain that Central Hungary is the most advanced region of Hungary, followed by Western Transdanubia and Central Transdanubia, and with significant lag Southern Transdanubia, Southern Great Plain, Northern Great Plain, and Northern Hungary tailing the list. The problem of increasing differences and income inequalities in Hungary is one of the most important challenges that must be answered according to the ‘Parlia- ment Resolution No. 1/2014 (I. 3.) OGY1 National Development 2030 – National Development and Territorial Development Concept’ which by the emergence of the ‘dual economy’ (less multi- and trans-national companies work with higher efficien- cy than the less viable small and medium enterprises sector which employs more people) is not merely an economic, but more a territorial issue as larger companies prefer territories near Western European markets. Kukely (2008) in his Ph.D. dis- sertation explains how foreign direct investments have reformed the Hungarian inequality patterns after the regime’s change in 1989. He explains that not merely the first location decision of the transnational companies caused differences, but the reinvestment of those companies, which already had plants in the 2000s, also caused differences. Comprehending the results of the ex post evaluations, this research article aims to review how the territorial development of the country can be explained by the distribution of the Hungarian top 500 companies. At first, some facts about the fund allocation are necessary to provide insights into the Hungarian development policy between 2007 and 2013. Figures 1 and 2 indicate the allocated funds in the fourth programming period of the EU (2007–2013) and the funds per capita for 2014. (The ‘Reports and queries system tool’ [REQUEST®] of the Hungarian Government provides data about projects with an approved budget.) 1 ‘OGY’ stands for Hungarian National Assembly (’Országgyűlés’ in Hungarian). The official translation of the Parliament Resolution could be found at https://regionalispolitika.kormany.hu/download/b/c9/e0000/ OFTK_vegleges_EN.pdf Regional Statistics, Vol. 7. No. 2. 2017:148–170; DOI: 10.15196/RS070208 Spatial distribution of the top 500 companies on regional and county levels 151 in Hungary – a repeated analysis Figure 1 Source: Own elaboration based on REQUEST® and Hungarian Central Statistical Office (HCSO) data. Figure 2 Source: Own elaboration based on REQUEST® and HCSO data. Next, some main indicators are interpreted in relation to the regional inequality patterns of the country. In each case, the amount of funds per capita is presented in Regional Statistics, Vol. 7. No. 2. 2017:148–170; DOI: 10.15196/RS070208 152 Mariann Szabó relation to the year after the programming period, namely 2014. Increasing popula- tion is a good indicator for the development of a region (Szentes 2011, Tomka 2011). Funds allocated could contribute to increasing the GVA of firms, which could lead to increasing demand for employees. Unfortunately, the amount of funds allocated did not influence the decline in population. Figure 3 104 HU10 102 HU21 100 HU22 98 HU23 2007=100%) HU31 %, %, 96 HU32 2014 ( 94 HU33 Change in population Change population in from 2007 to 92 0.000 0.200 0.400 0.600 0.800 1.000 Funds per capita (million HUF, 2014) Source: Own calculation based on REQUEST® and HCSO data. Abbreviations: Central Hungary (HU10), Central Transdanubia (HU21), Western Transdanubia (HU22), Southern Transdanubia (HU23), Northern Hungary (HU31), Northern Great Plain (HU32), Southern Great Plain (HU33). There exist more barriers against regional cohesion. A generally accepted fact is that in less developed regions, enterprises have less funds for development. Moreo- ver, several enterprises do not want to apply for funds as they cannot assume that they can meet the requirements for receiving the funds in the maintenance phase, after the realisation of the concrete project (for instance, hiring