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Regular version of the site

Article

Against the Wind – New Factories of Russian Manufacturing Subsidiaries of Western Multinational Corporations

Eurasian Geography and Economics. 2016. Vol. 57. No. 2. P. 161-179.

Using a series of interviews with the heads of Russian subsidiaries of Western multinational corporations and a unique database registering the openings of their new manufacturing plants in Russia during 2014-2015, we trace the changing demography, geography, and economics of foreign direct investments in industrial assets in Russia. We demonstrate that foreign companies in general were capable of overcoming the adverse economic conditions of 2015 and were able to complete their projects of installation of new factories that were launched in 2012-2013. More importantly, economic sanctions caused accelerated completion of previously started industrial works. Such new and upgraded factories not only target current opportunities and market niches in consumer markets but also aim at exploring possibilities in core industrial markets, including mining equipment, transportation equipment, and other types of industrial equipment. We also highlight the emergence of a new type of industrial project known as “fenced field projects,” which are new manufacturing facilities within the existing industrial sites of successful Russian firms. This new type is particularly attractive for companies in the machine-building and chemical industries. Fenced field projects can be either wholly owned subsidiaries or joint ventures, but the main feature of such projects is the active use of the developed physical and business infrastructure of the “hosting” Russian company. We demonstrate not only the changes in the geographic distribution of foreign direct investments in Russia but also the impact on medium-sized industrial towns (200,000-400,000 inhabitants), the most frequent location for industrial projects by foreign multinationals.