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

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  • Alexandre Gazaniol

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    (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)

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    Abstract

    (english) 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. _________________________________ (français) Cet article s’intéresse aux choix de localisation des firmes multinationales, et détermine dans quelle mesure ces choix dépendent de l’expérience internationale de l’investisseur et de celle de son groupe. A partir de données françaises, nous constatons que 95% des nouveaux investissements à l’étranger sont précédés d’exportations dans le même pays, tandis que 73% sont précédés d’importations. Indépendamment des caractéristiques observables et inobservables des pays, exporter vers un pays donné, et dans une moindre mesure en importer, accroît significativement la probabilité d’investir dans ce pays l’année suivante. La phase d’exportation est plus systématique pour les investissements dans des pays distants et pour les primo-investisseurs, tandis que l’expérience d’importation est significativement corrélée aux IDE dans les pays à bas revenu. Par ailleurs, les choix de localisation ne dépendent pas seulement de l’expérience internationale de l’investisseur, mais aussi de celle de son groupe : les firmes tendent à investir dans les pays où le groupe détient déjà une filiale locale, et sont plus enclines à investir dans des pays distants si d’autres sociétés affiliées y exportent déjà. Ces résultats suggèrent l’existence de stratégies coordonnées et/ou d’un partage d’informations entre sociétés affiliées.

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    File URL: http://www.dial.ird.fr/media/ird-sites-d-unites-de-recherche/dial/documents/publications/doc_travail/2012/2012-02
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    Bibliographic Info

    Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2012/02.

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    Length: 26 pages
    Date of creation: Apr 2012
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    Handle: RePEc:dia:wpaper:dt201202

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    Keywords: Multinational firms; location choices; internationalization process; export; import; proximity / concentration trade-off.;

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    References

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    1. Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 1021-1042, September.
    2. 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.
    3. Isabelle Méjean & Thierry Mayer & Benjamin Nefussi, 2010. "The Location of Domestic and Foreign Production Affiliates by French Multinational Firms," IMF Working Papers 10/22, International Monetary Fund.
    4. Büttner, Thiess & Ruf, Martin, 2004. "Tax Incentives and the Location of FDI: Evidence from a Panel of German Multinationals," ZEW Discussion Papers 04-76, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. 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.
    6. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
    7. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003. "How do Firms Agglomerate? A Study of FDI in France," CEPR Discussion Papers 3873, C.E.P.R. Discussion Papers.
    8. 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.
    9. Defever, Fabrice, 2006. "Functional fragmentation and the location of multinational firms in the enlarged Europe," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 658-677, September.
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