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What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector?

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Author Info
Siedschlag, Iulia (ESRI)
Zhang, Xiaoheng (ESRI)
Smith, Donal (ESRI)

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Abstract

We examine the attractiveness of European Union regions for location of multinationals in the Information and Communication Technologies (ICT) sector. Using data on 8,543 foreign subsidiaries established in 229 regions of the European Union over the period 1998-2008 we find that on average, the location probability increases with regional demand, agglomeration economies, technological development, flexibility of labour markets, and information technology infrastructure. The determinants of the location choice of ICT multinationals are different for regions in Western Europe and Central and Eastern Europe. While in Western Europe, regions with higher GDP per capita are preferred for both ICT multinationals in manufacturing and service sectors, in Central and Eastern Europe, regions with lower GDP per capita attract the bulk of ICT multinationals in the service sector. Unemployment rates appear negatively correlated with the probability of location in the whole European Union and Western Europe, while they increase attractiveness for regions in Central and Eastern Europe. Some determinants are also found to have heterogeneous effects on multinationals from different countries. In particular, US multinationals are not sensitive to labour costs while EU multinationals respond to this factor negatively.

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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number DYNREG45.

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Length: 44 pages
Date of creation: 2009
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Handle: RePEc:esr:wpaper:dynreg45

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Related research
Keywords: Foreign direct investment; Information and Communication Technologies; Location choice; Conditional logit; Nested logit; European Union.;

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