Following the 2008 financial crisis, the European Union (EU) has placed growing emphasis on regional industrial specialisation and reindustrialisation as instruments of structural change and economic catching-up. Recent challenges, including the green and digital transition and the strengthening of European defence capabilities, have further underscored the strategic importance of industrial renewal. In Hungary, foreign direct investment (FDI) have served as a catalyst of industrial restructuring, resulting in one of the highest shares of foreign-controlled affiliates in manufacturing in the EU. While FDI has driven productivity gains and technological advancement, especially in the manufacturing sector, it has also exposed regions to the risk of falling into a regional development trap, where growth remains dependent on low-cost labour and assembly-based production. This study aims to assess whether FDI-led reindustrialisation in Hungary supports regional catching-up with the average of the former EU12 member states or instead leads to development traps at the NUTS 3 level. We identify five region types characterised by distinct industrial structures and development trajectories. Our results show that reindustrialisation contributed to catching-up until 2015; however, since then several FDI-led manufacturing regions have exhibited characteristics of a development trap, where limited innovation capacity constrains further productivity upgrading. The findings suggest that FDI-led reindustrialisation is associated with structural constraints that may hinder long-term regional catching-up with the EU average.
Vas et al. (Fri,) studied this question.