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Do U.S. Multinationals Engage In Sequential Choice?: Evidence from New Manufacturing Operations in Europe

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  • Mataloni, Raymond
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    Abstract

    Despite an extensive literature on the determinants of the foreign location choices by multinational companies, researchers have only recently begun to systematically examine how these companies form their location consideration sets. When considering new foreign locations, do firms evaluate the attributes of the alternatives at the national level, the sub-national regional level, at some other level of geographical aggregation, or using some combination of these? This paper employs discrete choice models to examine how U.S. multinational companies form their location consideration sets and to identify some of the relevant location attributes. The results indicate that U.S. firms tend to employ a sequential, or hierarchical, decision-making process in which a host country is first chosen based on one set of attributes and then a region within that country is chosen based on another set of attributes. The relevant location attributes include industrial agglomeration and labor market conditions.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20195.

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    Date of creation: 14 Nov 2007
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    Handle: RePEc:pra:mprapa:20195

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    Keywords: nested logit; multinational companies; location choice;

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    1. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
    2. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
    3. Subramanian Rangan, 2000. "Search and Deliberation in International Exchange: Microfoundations to Some Macro Patterns," Journal of International Business Studies, Palgrave Macmillan, vol. 31(2), pages 205-222, June.
    4. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
    5. Grether, David & Wilde, Louis, 1984. " An Analysis of Conjunctive Choice: Theory and Experiments," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 10(4), pages 373-85, March.
    6. Park, C Whan & Lessig, V Parker, 1981. " Familiarity and Its Impact on Consumer Decision Biases and Heuristics," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 8(2), pages 223-30, September.
    7. Hideki Yamawaki, 2006. "The location of American and Japanese multinationals in Europe," International Economics and Economic Policy, Springer, Springer, vol. 3(2), pages 157-173, November.
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