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An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data

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Author Info
Simona Rasciute () (Dept of Economics, Loughborough University)
Eric J. Pentecost () (Dept of Economics, Loughborough University)
Helena I. Marques () (Dept of Economics, Loughborough University)

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Abstract

This paper employs a novel multi-level data set and a multinomial logit model - to examine the factors explaining 1,223 foreign investment location decisions by firms in the EU(15), Japan, Norway, Russia, Switzerland and the US in 12 Central and Eastern European countries (CEECs). The highly significant empirical results, based on a general underlying model of imperfect competition, show that the responsiveness of foreign direct investment in the CEECs to country-level variables differs significantly both across sectors and across firms of different sizes and profitability. In particular, in addition to the traditional importance of market size and distance, firm size and the effective corporate tax rate are also important for the location of investment.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/MNLpaper.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_22.

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Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:lbo:lbowps:2007_22

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Related research
Keywords: Multi-level data; foreign direct investment; multinomial logit model;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Linkages

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    Other versions:
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  14. 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. [Downloadable!] (restricted)
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  19. Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re-entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, 01. [Downloadable!] (restricted)
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  21. Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December. [Downloadable!] (restricted)
  22. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December. [Downloadable!] (restricted)
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  23. Salvador Barrios & Sophia Dimelis & Helen Louri & Eric Strobl, . "Efficiency Spillovers from Foreign Direct Investment in the EU Periphery: A comparative study of Greece, Ireland and Spain," Working Papers 2002-02, FEDEA. [Downloadable!]
    Other versions:
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