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Does FDI in manufacturing cause FDI in business services? Evidence from French firm-level data

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  • Benjamin Nefussi
  • Cyrille Schwellnus

Abstract

This paper uses a large French firm-level data set to evaluate the determinants of location choices in services. In a first step, estimates for four broad services sectors are compared with the estimates for the manufacturing sector. Using a discrete choice model, we find that this framework does fairly well in explaining location choices in services and that the parameter estimates for services are close to the ones for manufacturing. We then investigate whether the similarity in estimated parameters is due to a complementarity between location choices in manufacturing and in services, in the sense that manufacturing location choices may cause the location of services. A particularly appropriate services sector, for this purpose is the business services sector, for which input-output linkages with the manufacturing sector are particularly strong. It is found that the downstream demand of French manufacturing firms has a positive effect on the location choice probabilities of French business services firms. This effect is robust.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 43 (2010)
Issue (Month): 1 (February)
Pages: 180-203

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Handle: RePEc:cje:issued:v:43:y:2010:i:1:p:180-203

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  1. Arnold, Jens & Mattoo, Aaditya & Smarzynska Javorcik, Beata, 2006. "Does Services Liberalization Benefit Manufacturing Firms?," CEPR Discussion Papers 5902, C.E.P.R. Discussion Papers.
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Cited by:
  1. Giuseppe Tattara, 2008. "The Internationalisation of Production Activities of Italian Industrial Districts," Working Papers 2008_13, Department of Economics, University of Venice "Ca' Foscari".
  2. Broussolle Damien, 2012. "A Note on the Links Between Manufacturing, Goods and Services Exports," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(Special N), pages 600-620, November.
  3. Valentina Meliciani & davide castellani & loredana mirra, 2013. "The Determinants Of Inward Foreign Direct Investment In Business Services Across European Regions," ERSA conference papers ersa13p861, European Regional Science Association.
  4. Nuno CRESPO & Maria Paula FONTOURA, 2010. "Does the location of manufacturing determine service sectors’ location choices? Evidence from Portugal," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 10(1).
  5. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
  6. Resmini, Laura & Siedschlag, Iulia, 2013. "Is foreign direct investment to China crowding out the foreign direct investment to other countries?," China Economic Review, Elsevier, vol. 25(C), pages 1-16.
  7. Spyros Arvanitis & Tobias Stucki & Heinz Hollenstein, 2013. "Determinants of Internationalisation – Do they Differ among Sectors and Business Functions? Evidence from Firm-level Data," KOF Working papers 13-348, KOF Swiss Economic Institute, ETH Zurich.

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