The Location Decisions of Multinationals and the Cultural Link: Evidence from Spanish Direct Investment Abroad

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The Location Decisions of Multinationals and the Cultural Link: Evidence from Spanish Direct Investment Abroad

Author Info

Juan Miguel Benito-Ostolaza () (Departamento de Economía-UPNA)
Salvador Barrios () (Directorate-General for Economic and Financial Affairs, European Commission)

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Salvador Barrios

Abstract

We examine the way in which differences in language and culture may affect direct investment decisions. We use a discrete choice approach to model the location decisions of multinationals in which cultural links, language differences, distance and market access are accounted for. This model is used to study the determinants of the location decisions of Spanish multinationals over the period 1988-1997. Cultural ties, including language, are found significantly to affect the location decisions of Spanish firms abroad. These ties, also explain the leading position of Spanish multinationals in Latin American countries compared to more advanced home countries such as the US, Germany and the UK. The specific advantage of Spanish multinationals together with the rapid economic development of the Spanish economy, which has traditionally been a large FDI-recipient, tend to corroborate the view that intangible assets such as culture and language proximity do matter in understanding net outward investment patterns.

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Publisher Info
Paper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 0804.

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Length: pages
Date of creation: 2008
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Publication status: Published in
Handle: RePEc:nav:ecupna:0804

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Find related papers by JEL classification:
A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-01-17 (All new papers)
NEP-CUL-2009-01-17 (Cultural Economics)

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This page was last updated on 2009-11-27.

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