Advanced Search
MyIDEAS: Login to save this paper or follow this series

Location Choices of Multinational Firms in Europe: the Role of National Bourdaries and EU Policy

Contents:

Author Info

  • Roberto Basile

    (ISAE, Rome)

  • Davide Castellani

    (University of Urbino)

Abstract

We examine the determinants of multinational firms’ location choices in Europe by estimating a nested logit model on a data-set of 5,761 foreign subsidiaries established in 55 regions in 8 EU countries over the period 1991-1999. We find that firms perceive regions across different countries as more similar than regions within national borders. This might be revealing that the process of European integration has reduced the national specificities perceived by multinationals and that regions within Europe attract FDIs more across than within countries. Controlling for regional market size and potential, agglomeration economies and labor markets conditions, we also find that EU regional policy, captured by Cohesion Funds and Objective 1 eligibility, played a significant role in attracting multinationals, thus mitigating the agglomeration forces at work. Differences emerge in determinants of EU and US multinationals location choices, with special reference to the role of labor markets.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.dagliano.unimi.it/media/WP2003_183.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 183.

as in new window
Length:
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:csl:devewp:183

Contact details of provider:
Postal: Via Conservatorio 7 - 20122 Milano
Phone: +39 02 503 16486
Fax: +39 02 503 16475
Web page: http://www.dagliano.unimi.it/
More information through EDIRC

Related research

Keywords: Europe; Foreign Direct Investments; Location; Nested Logit Models;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
  2. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
  3. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE.
  4. Barrell, Ray & Pain, Nigel, 1999. "Domestic institutions, agglomerations and foreign direct investment in Europe," European Economic Review, Elsevier, vol. 43(4-6), pages 925-934, April.
  5. Salvador Barrios & Holger Görg & Eric Strobl, 2006. "Multinationals' Location Choice, Agglomeration Economies, and Public Incentives," International Regional Science Review, , vol. 29(1), pages 81-107, January.
  6. Anne-Celia Disdier & Thierry Mayer, 2003. "How Different is Eastern Europe? Structure and Determinants of Location Choices by French Firms in Eastern and Western Europe," Working Papers 2003-13, CEPII research center.
  7. Paul Krugman, 1992. "A Dynamic Spatial Model," NBER Working Papers 4219, National Bureau of Economic Research, Inc.
  8. Martin, Ron, 1999. "The New 'Geographical Turn' in Economics: Some Critical Reflections," Cambridge Journal of Economics, Oxford University Press, vol. 23(1), pages 65-91, January.
  9. Hensher, David A. & Greene, William H., 2002. "Specification and estimation of the nested logit model: alternative normalisations," Transportation Research Part B: Methodological, Elsevier, vol. 36(1), pages 1-17, January.
  10. Florian Heiss, 2002. "Structural choice analysis with nested logit models," Stata Journal, StataCorp LP, vol. 2(3), pages 227-252, August.
  11. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November.
  12. Keith Head & John Ries & Deborah Swenson, 1994. "Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States," NBER Working Papers 4767, National Bureau of Economic Research, Inc.
  13. Devereux, Michael P. & Griffith, Rachel, 2003. "The Impact of Corporate Taxation on the Location of Capital: A Review," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 33(2), pages 275-292, September.
  14. Gropp, Reint & Kostial, Kristina, 2000. "The disappearing tax base: is foreign direct investment eroding corporate income taxes?," Working Paper Series 0031, European Central Bank.
  15. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
  16. Davide Castellani & Antonello Zanfei, 2003. "Technology gaps, absorptive capacity and the impact of inward investments on productivity of European firms ," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(6), pages 555-576.
  17. Andres RodrIguez-Pose & Ugo Fratesi†, 2004. "Between Development and Social Policies: The Impact of European Structural Funds in Objective 1 Regions," Regional Studies, Taylor & Francis Journals, vol. 38(1), pages 97-113.
  18. John A. Cantwell & Lucia Piscitello, 2003. "The Recent Location of Foreign R&D Activities by Large MNCs in the European Regions. The Role of Different Sources of Spillovers," ERSA conference papers ersa03p322, European Regional Science Association.
  19. Andrés Rodríguez-Pose, 1999. "Convergence or Divergence? Types of Regional Responses to Socio-Economic Change in Western Europe," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 90(4), pages 365-378, November.
  20. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
  21. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January.
  22. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  23. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
  24. Jean-Louis Mucchielli & Thierry Mayer, 1999. "La localisation à l'étranger des entreprises multinationales," Sciences Po publications info:hdl:2441/10196, Sciences Po.
  25. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  26. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
  27. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
  28. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
  29. Roberto Basile, 2002. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," ISAE Working Papers 27, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  30. Devereux, Michael P & Griffith, Rachel, 2002. "Evaluating Tax Policy for Location Decisions," CEPR Discussion Papers 3247, C.E.P.R. Discussion Papers.
  31. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D. With contributions by-Name:Adamowicz,Wiktor, 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, October.
  32. Cantwell, John & Iammarino, Simona, 2001. "EU Regions and Multinational Corporations: Change, Stability and Strengthening of Technological Comparative Advantages," Industrial and Corporate Change, Oxford University Press, vol. 10(4), pages 1007-37, December.
  33. John Cantwell & Lucia Piscitello, 2005. "Recent Location of Foreign-owned Research and Development Activities by Large Multinational Corporations in the European Regions: The Role of Spillovers and Externalities," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 1-16.
  34. Sergio Mariotti & Lucia Piscitello, 1995. "Information Costs and Location of FDIs within the Host Country: Empirical Evidence from Italy," Journal of International Business Studies, Palgrave Macmillan, vol. 26(4), pages 815-841, December.
  35. Keith Head & Thierry Mayer, 2004. "Non-Europe : the magnitude and causes of market fragmentation in the EU," Cahiers de la Maison des Sciences Economiques bla99004a, Université Panthéon-Sorbonne (Paris 1).
  36. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 321-359, October.
  37. Roberta De Santis & Maria Cristina Mercuri & Claudio Vicarelli, 2001. "Taxes and Location of Foreign Direct Investments: an Empirical Analysys for the European Union Countries," ISAE Working Papers 24, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  38. Ron A. Boschma & Jan G. Lambooy, 1999. "Evolutionary economics and economic geography," Journal of Evolutionary Economics, Springer, vol. 9(4), pages 411-429.
  39. Fatas, Antonio, 1997. "EMU: Countries or regions? Lessons from the EMS experience," European Economic Review, Elsevier, vol. 41(3-5), pages 743-751, April.
  40. Castellani, Davide & Zanfei, Antonello, 2004. "Choosing international linkage strategies in the electronics industry: the role of multinational experience," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 447-475, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.
  2. Roberto Basile & Davide Castellani & Antonello Zanfei, 2007. "Location choices of multinational firms in Europe: the role of EU cohesion policy," Quaderni del Dipartimento di Economia, Finanza e Statistica 32/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  3. Arauzo Carod, Josep Maria & Liviano Solís, Daniel & Manjón Antolín, Miguel C., 2008. "Empirical studies in industrial location: an assessment of their methods and results," Working Papers 2072/9257, Universitat Rovira i Virgili, Department of Economics.
  4. Rodrigo Alegria, 2006. "Countries, Regions and Multinational Firms: Location Determinants in the European Union," ERSA conference papers ersa06p143, European Regional Science Association.
  5. Frances Ruane & Xiaoheng Zhang, 2007. "Where do MNEs Expand Production: Location Choices of the Pharmaceutical Industry in Europe after 1992," Papers WP211, Economic and Social Research Institute (ESRI).
  6. Davide CASTELLANI & Valentina MELICIANI & Loredana Mirra, 2012. "The determinants of inward foreign direct investment in business services across european regions," Quaderni del Dipartimento di Economia, Finanza e Statistica 104/2012, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  7. Riess, Armin & Uppenberg, Kristian, 2004. "The internationalisation of production: moving plants, products, and people," EIB Papers 1/2004, European Investment Bank, Economics Department.
  8. Roberto Basile & Luigi Benfratello & Davide Castellani, 2010. "Location Determinants of Greenfield Foreign Investments in the Enlarged Europe: Evidence from a Spatial Autoregressive Negative Binomial Additive Model," Working papers 10, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  9. Siedschlag, Iulia & Zhang, Xiaoheng & Smith, Donal, 2009. "What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector?," Papers DYNREG45, Economic and Social Research Institute (ESRI).
  10. Kokko, Ari & Gustavsson, Patrik, 2004. "Regional integration, foreign direct investment, and regional development," EIB Papers 5/2004, European Investment Bank, Economics Department.
  11. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:csl:devewp:183. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chiara Elli).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.