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Functional fragmentation and the location of multinational firms in the enlarged Europe

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Author Info
Fabrice Defever () (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
Abstract

Despite the recent advances in the theory of location, the analysis of the role of services surrounding production activity has been largely neglected. This paper analyzes the co-location of a multinational firm's value chain in the enlarged European Union. Depending on its particular characteristics, each function (or activity) would favor different country characteristics. Opposing this dispersion force, vertical linkages between stages can encourage firms to co-locate different activities in the same country. We use recently collected individual firm data on almost 11 000 location choices for a 5 years period and 23 countries. We analyze the determinants of location choice for each activity, including sectoral and functional agglomeration variables. We also illuminate the co-location of functions at the firm level, specifically that of R&D and production.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00118808_v1.

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Date of creation: Jun 2006
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Handle: RePEc:hal:cesptp:halshs-00118808_v1

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Related research
Keywords: Functional fragmentation; vertical linkages; location choice.;

References listed on IDEAS
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  14. Markusen, James R., 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," CEPR Discussion Papers 5408, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Disdier, Anne-Celia & Mayer, Thierry, 2004. "How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 280-296, June. [Downloadable!] (restricted)
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  17. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
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  1. 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). [Downloadable!]
  2. Julia Spies, 2009. "Network and Border Effects: Where Do Foreign Multinationals Locate in Germany?," IAW Discussion Papers 47, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
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