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The author researched the foreign direct investment flows, patterns and effects in conditions of regional economic integration in Europe. The foreign direct investment presence results in two effects: first, increase in competition, and second, creation of forward and backward linkages between domestic firms and foreign affiliates. The benefits of foreign direct investment for their host countries take the form of various types of externalities or spillovers (of technology, knowledge, productivity). The potential spillover benefits could be realized if domestic firms have the capacity to absorb foreign technologies and skills.