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State Characteristics and the Locational Choice of Foreign Direct Investment: Evidence from Regional FDI in Mexico 1989-2006

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  • JACOB A. JORDAAN

Abstract

Despite the growing importance of foreign direct investment (FDI) in the Mexican economy, statistical evidence on the determinants of the regional distribution of foreign-owned firms is seriously limited. In this paper, empirical findings are presented from a variety of econometric models that identify several regional characteristics influencing the locational choice of FDI. The main findings are threefold. First, several locational factors appear to be potentially important; these include regional demand, wages, schooling, infrastructure, and agglomeration economies. Second, the effect of agglomeration economies stems from several sources. In particular, the regional presence of agglomerations of manufacturing activity and of foreign-owned manufacturing firms both have an independent positive effect on the locational decision of new FDI. Third, the locational process of maquiladora firms differs from the locational process of overall FDI. The actual findings suggest that regional demand and infrastructure, as suggested above, are "not" important locational factors for export-oriented firms. Furthermore, whereas agglomeration economies from manufacturing and the presence of existing FDI attract new maquiladora investment, the presence of a regional agglomeration of services "deters" the location of new maquiladora firms. Finally, agglomeration economies appear to be more important in the locational process of maquiladora firms. Copyright (c) 2008 Copyright the Authors. Journal compilation (c) 2008 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Gatton College of Business and Economics, University of Kentucky in its journal Growth and Change.

Volume (Year): 39 (2008)
Issue (Month): 3 ()
Pages: 389-413

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Handle: RePEc:bla:growch:v:39:y:2008:i:3:p:389-413

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0017-4815

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Cited by:
  1. Escobar Gamboa, Octavio Romano, 2012. "Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states," Economics Papers from University Paris Dauphine 123456789/10605, Paris Dauphine University.
  2. Jordaan, Jacob A., 2008. "Intra- and Inter-industry Externalities from Foreign Direct Investment in the Mexican Manufacturing Sector: New Evidence from Mexican Regions," World Development, Elsevier, vol. 36(12), pages 2838-2854, December.
  3. Riccardo Crescenzi & Carlo Pietrobelli & Roberta Rabellotti, 2012. "Innovation Drivers, Value Chains and the Geography of Multinational Firms in European Regions," LEQS – LSE 'Europe in Question' Discussion Paper Series 53, European Institute, LSE.
  4. Jordaan, Jacob A., 2011. "FDI, Local Sourcing, and Supportive Linkages with Domestic Suppliers: The Case of Monterrey, Mexico," World Development, Elsevier, vol. 39(4), pages 620-632, April.

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