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Location choices of multinational firms in Europe: the role of EU cohesion policy

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Author Info
Roberto Basile
Davide Castellani
Antonello Zanfei

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Abstract

In this paper we examine the determinants of location choices of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. Using data on 5,509 foreign subsidiaries established in 50 regions in 8 EU countries over the period 1991-1999, we estimate a mixed logit model of the determinants of MNFs’ location choices. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non European ones.

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Publisher Info
Paper provided by Università di Perugia, Dipartimento Economia, Finanza e Statistica in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 32/2007.

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Length: 27 pages
Date of creation: 31 Apr 2007
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Handle: RePEc:pia:wpaper:32/2007

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Related research
Keywords: Europe; Foreign Direct Investments; Location Choice; Mixed Logit Models;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
R30 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - General

References listed on IDEAS
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  1. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January. [Downloadable!] (restricted)
  2. D. Garel Rhys, 2004. "The Motor Industry in an Enlarged EU," The World Economy, Blackwell Publishing, vol. 27(6), pages 877-900, 06. [Downloadable!] (restricted)
  3. Poirier, Dale J., 1996. "A Bayesian analysis of nested logit models," Journal of Econometrics, Elsevier, vol. 75(1), pages 163-181, November. [Downloadable!] (restricted)
  4. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR, CES, MSH, vol. 17(35), pages 449-495, October. [Downloadable!] (restricted)
  5. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June. [Downloadable!] (restricted)
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  6. Derek K. Kellenberg, 2007. "The Provision Of Public Inputs And Foreign Direct Investment," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 170-184, 04. [Downloadable!] (restricted)
  7. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," Manchester School, University of Manchester, vol. 70(3), pages 291-314, June. [Downloadable!] (restricted)
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  8. Roberto, Basile, 2004. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 3-25, January. [Downloadable!] (restricted)
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  9. 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, 01. [Downloadable!] (restricted)
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  10. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Julia Spies, 2009. "Network and Border Effects: Where Do Foreign Multinationals Locate in Germany?," IAW Discussion Papers 47, Institut für Angewandte Wirtschaftsforschung (IAW). [Downloadable!]
  2. Siedschlag, Iulia & Smith, Donal & Turcu, Camelia & Zhang, Xiaoheng, 2009. "What Determines the Attractiveness of the European Union to the Location R&D Multinational Firms?," Papers DYNREG46, Economic and Social Research Institute (ESRI). [Downloadable!]
  3. Vivien Procher, 2009. "Agglomeration Effects and the Location of Foreign Direct Investment – Evidence from French First-time Movers," Ruhr Economic Papers 0100, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  4. Simona Rasciute & Eric J Pentecost, 2008. "The Latent Heterogeneity in Investment Location Choices of Multinational Enterprises," Discussion Paper Series 2008_16, Department of Economics, Loughborough University, revised Dec 2008. [Downloadable!]
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