Neven Mimica that FDI flows to the new member states, while relevant for the recipient countries, have in fact been only a minor part of overall FDI outflows of the EU­15: within the latter, in 2004 the share of outflows to new member states was 4% against a corresponding share of 53% for outflows to other member states in the EU-15 and a 12% share for flows to the US. In addition, a large part of the FDI by the EU-15 in the new member states, particularly in the services sector where most of FDI is invested, has occurred in the context of privatisation programmes to capture fast-growing markets and does not involve the substitution of activities previously carried out in the home country. Furthermore, different studies have tried to identify the impact of relocation on non employment. Recent research for some EU-15 countries suggests that a mere 1% to 1.5% of the annual job turnover can be attributed to relocation, and that only a part concerns relocation to the new member states. In Germany and Austria, for example, two countries which figure among the largest investors in the EU-10, it is calculated that such investment has led over the past fifteen years to a lower employment creation, in cumulative terms, in the range of 0.3% to 0.7%, which is a very small percentage in particular if one also considers the overall job creation which took place over the same period. Moreover, in many instances, outsourcing part of the production process to the new member states has allowed firms in the EU-15 to strengthen their competitive position with a net favourable impact on employment(European Commission, 2006). Impact on economic development of recipient countries Relocation of economic activity, through, for instance, foreign direct investment is usually regarded as beneficial to the recipient country and has come to be regarded as an important tool for development. It provides investment capital that is lacking domestically and thus fosters economic development. Compared to other international capital flows, FDI is thought to be less volatile because of the long-term orientation of investors. In the context of developing and transition economies, FDI is expected to have spill-over effects to local industry and disseminate managerial and technological knowledge. Spill-over can take four different directions:(i) through competition with foreign controlled plants, local companies strive to become more efficient and competitive;(ii) through cooperation of foreign owned enterprises with up­stream suppliers and downstream clients technological and managerial knowledge is transferred;(iii) technology spill-overs occur through imitation, 160