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Information Costs and Location of FDIs within the Host Country: Empirical Evidence from Italy

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Author Info
Sergio Mariotti (Department of Economy and Production, Politecnico di Milano)
Lucia Piscitello (Department of Economy and Production, Politecnico di Milano)

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Abstract

The literature on foreign direct investments (FDIs) has analysed the location strategies of multinational enterprises across national borders, but there have been few studies of location decisions by foreign investors within the borders of a single country. The paper argues that the driving factors of these location choices have differing influences on indigenous and foreign investors. Specifically, foreign investors suffer from a condition of adverse asymmetry in information costs compared to insiders. Thus, foreign investors' decisions on the location of their activities within a host country mainly reflect a rational responses to the existence of information costs.In this paper, a cross-region multiple regression model is developed, with reference to a database containing detailed information on cross-border takeovers involving Italian industrial firms in the period 1986–91. Empirical evidence supports the hypothesis that the spatial distribution of inward FDIs is mainly governed by information costs. Finally, implications for future research are discussed.© 1995 JIBS. Journal of International Business Studies (1995) 26, 815–841

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Article provided by Palgrave Macmillan Journals in its journal Journal of International Business Studies.

Volume (Year): 26 (1995)
Issue (Month): 4 (December)
Pages: 815-841
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Handle: RePEc:pal:jintbs:v:26:y:1995:i:4:p:815-841

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  10. Roberto Basile & Davide Castellani, 2003. "Location Choices of Multinational Firms in Europe: the Role of National Bourdaries and EU Policy," Development Working Papers 183, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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  11. Cantwell, John A. & Piscitello, Lucia, 2000. "The Location Of Mnc'S Technological Activities In Europe: Agglomerative Tendencies And Other Territorial Externalities," ERSA conference papers ersa00p343, European Regional Science Association. [Downloadable!]
  12. Figueiredo, Octavio & Guimaraes, Paulo, 1999. "Start-Ups Domestic Location Decisions, and the Entrepreneur's Geographical Origin," ERSA conference papers ersa99pa045, European Regional Science Association. [Downloadable!]
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  14. Sevkiye Sence Turk & Lale Berkoz, 2006. "Modelling the Intra-Metropolitan Location of Foreign Investment Firms in Istanbul," ERSA conference papers ersa06p576, European Regional Science Association. [Downloadable!]
  15. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: are Italian Regions Doomed?," Development Working Papers 200, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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