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Network and border effects: Where do foreign multinationals locate in Germany?

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  • Spies, Julia

Abstract

This study assesses the determinants of location choices of foreign multinational firms at the level of German federal states. Adjacency and existing firm networks are assumed to influence the investors' profits in a given location by overcoming informational disadvantages when entering the new market. A nested logit model resembles the structure of the location choice process well, since it allows foreign investors to have differing perceptions about the substitutability among East and West German federal states. By using affiliate-level data between 1997 and 2005, the results confirm that firms react positively to local demand, a common border and existing firm networks, while unit labor costs exhibit the expected negative impact. In the sectoral estimations, it is shown that these effects vary in their relevance across manufacturing and service affiliates, and between upstream and downstream activities and that intersectoral linkages play an important role.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 1 (January)
Pages: 20-32

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Handle: RePEc:eee:regeco:v:40:y:2010:i:1:p:20-32

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Web page: http://www.elsevier.com/locate/regec

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Keywords: Location choice Multinational firms Nested logit model;

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References

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Cited by:
  1. Isabelle Méjean & Benjamin Nefussi & Thierry Mayer, 2007. "The Location of Domestic and Foreign Production Affiliates by French Multinational Firms," Sciences Po publications 2007-07, Sciences Po.
  2. Andrea Gauselmann & Philipp Marek & J. P. Angenendt, 2011. "MNE’s Regional Location Choice - A Comparative Perspective on East Germany, the Czech Republic and Poland," IWH Discussion Papers 8, Halle Institute for Economic Research.
  3. Ksenia Gonchar & Philipp Marek, 2013. "Natural-resource or market-seeking FDI in Russia? An empirical study of locational factors affecting the regional distribution of FDI entries," HSE Working papers WP BRP 26/EC/2013, National Research University Higher School of Economics.
  4. Riccardo Crescenzi & Carlo Pietrobelli & Roberta Rabellotti, 2012. "Innovation Drivers, Value Chains and the Geography of Multinational Firms in European Regions," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 3, London School of Economics / European Institute.
  5. Falck, Oliver & Heblich, Stephan & Kipar, Stefan, 2010. "Industrial innovation: Direct evidence from a cluster-oriented policy," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 574-582, November.
  6. K. Gonchar & Philipp Marek, 2013. "Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries," IWH Discussion Papers 3, Halle Institute for Economic Research.
  7. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8mcgcdbi is not listed on IDEAS
  8. Stefan Kipar, 2012. "Determinants of Firm Innovation - Evidence from German Panel Data," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 45, 8.
  9. Andrea Gauselmann & Philipp Marek, 2012. "Regional determinants of MNE’s location choice in post-transition economies," Empirica, Springer, vol. 39(4), pages 487-511, November.
  10. Andrea Gauselmann & Philipp Marek, 2011. "Regional Determinants of MNE's Location Choice in Transition Economies," WIFO Working Papers 412, WIFO.

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