Foreign direct investment and agglomeration: evidence from Italy
AbstractA number of empirical studies have analyzed the effect of agglomeration on multinational investment, verifying whether the agglomerated areas attract foreign direct investment inflows. Despite the large number of papers, no systematic attempt has been made to disentangle whether FDI are attracted by the concentration of firms within the same sector (specialization) or within different sectors (diversity). Furthermore, the question whether firm size in the host area influences multinational investment is still unanswered. This paper provides empirical evidence of the role of agglomeration economies in attracting foreign direct investments within Italian regions and provinces, distinguishing between specialization and diversity, and of the role of firm size in foreign investorsÂ’ choices. We employ a new territorial data set on foreign direct investment collected by the Italian Foreign Exchange Office for industrial and service sectors. We find strong evidence that specialized geographical areas attract FDI, whereas diversified areas do so only for industrial sectors; finally, there is little evidence that firm size has an impact on FDI since, if anything, only big firms in southern regions appear to have a positive effect on foreign investorsÂ’ decisions.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 526.
Date of creation: Dec 2004
Date of revision:
foreign direct investment; agglomeration economies; regional economics;
Other versions of this item:
- Raffaello Bronzini, 2004. "Foreign Direct Investment and Agglomeration: Evidence from Italy," ERSA conference papers ersa04p321, European Regional Science Association.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
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