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The location choices of multinational firms : the role of internationalization experience and group affiliation

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  • Gazaniol, Alexandre
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    Abstract

    This paper investigates whether location choices of multinational firms depend on past export, import or FDI experience on foreign markets, and the experience of other affiliated firms. Using French data, we observe that 95% of new FDIs are preceded by exports in the same country, whereas 73% are preceded by imports. Regardless of locations’ observable and unobservable characteristics, we find that exporting in a given country, and to a smaller extent importing from it, significantly phase is more systematic for investing in distant countries and for first-time investors, whereas import experience is significantly correlated with FDI in low-income countries. Location choices not only depend on the investor’s own international experience, but also on the international experience of other affiliated firms: firms tend to invest in countries where the group already owns a local affiliate, and are more likely to invest in a distant country if other affiliated firms are already exporting there. These findings suggest the existence of coordinated strategies and/or information sharing between affiliated firms.

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    Bibliographic Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/9018.

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    Date of creation: 2012
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    Publication status: Published in DIAL Document de travail, 2012
    Handle: RePEc:dau:papers:123456789/9018

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    Related research

    Keywords: Firmes multinationales; choix de localisation; processus d’internationalisation; exportation; importation; arbitrage proximité / concentration; Multinational firms; location choices; internationalization process; export; import; proximity / concentration trade-off;

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    1. Matthieu Crozet & Thierry Mayer & Jean-Louis Mucchielli, 2004. "How do firms agglomerate? A study of FDI in france," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
    2. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
    3. Basile, Roberto & Castellani, Davide & Zanfei, Antonello, 2008. "Location choices of multinational firms in Europe: The role of EU cohesion policy," Journal of International Economics, Elsevier, vol. 74(2), pages 328-340, March.
    4. James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," Cowles Foundation Discussion Papers 1218, Cowles Foundation for Research in Economics, Yale University.
    5. Mayer, T. & Mejean, I. & Nefussi, B., 2010. "The location of domestic and foreign production affiliates by French multinational firms," Journal of Urban Economics, Elsevier, vol. 68(2), pages 115-128, September.
    6. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, October.
    7. 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.
    8. 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.
    9. Thiess Buettner & Martin Ruf, 2007. "Tax incentives and the location of FDI: Evidence from a panel of German multinationals," International Tax and Public Finance, Springer, vol. 14(2), pages 151-164, April.
    10. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan, vol. 8(1), pages 23-32, March.
    11. repec:hal:cesptp:halshs-00118808 is not listed on IDEAS
    12. Fabrice Defever, 2006. "Functional fragmentation and the location of multinational firms in the enlarged Europe," Cahiers de la Maison des Sciences Economiques bla06052, Université Panthéon-Sorbonne (Paris 1).
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