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Foreign Direct Investment and Agglomeration: Evidence from Italy

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  • Raffaello Bronzini

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Abstract

A number of empirical works analyzed the effect of agglomeration on multinational investment verifying whether agglomerated areas attract foreign direct investment. Despite the large amount of studies, there has been no systematic attempts to disentangle whether FDI are drawn by the concentration of firms within the same sector (specialization) or within different sectors (diversity). Furthermore, the question whether firms’ size of the host area influences multinational investment is still unanswered. This paper provides an empirical evidence on the role of agglomeration economies in attracting foreign direct investments within Italian regions and provinces, distinguishing between specialization and diversity externalities, and on the role of firms’ size in affecting foreign investors’ choices. We employ a new territorial data set on foreign direct investment collected by the Italian Foreign Exchange Office for industrial and service sectors. We find a strong evidence that specialized geographic areas attract FDI, whereas diversified areas draw FDI only for industrial sectors; finally there is little evidence that firm size has an impact on FDI, if anything, only big firms in Southern regions would seem to affect positively foreign investor decisions.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p321.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p321

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  1. Sergio Mariotti & Lucia Piscitello, 1995. "Information Costs and Location of FDIs within the Host Country: Empirical Evidence from Italy," Journal of International Business Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 26(4), pages 815-841, December.
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  15. Robert Dekle, 2002. "Industrial Concentration And Regional Growth: Evidence From The Prefectures," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 310-315, May.
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Cited by:
  1. Giulio Cainelli & Eleonora Di Maria & Roberto Ganau, 2011. "Agglomeration, related-variety and internationalisation. Does a relationship exist?," Openloc Working Papers, Public policies and local development 1114, Public policies and local development.
  2. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
  3. Roberto Antonietti & Giulio Cainelli, 2007. "Spatial Agglomeration, Technology and Outsourcing of Knowledge Intensive Business Services Empirical Insights from Italy," Working Papers, Fondazione Eni Enrico Mattei 2007.79, Fondazione Eni Enrico Mattei.
  4. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers, European Regional Science Association ersa05p148, European Regional Science Association.
  5. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: are Italian Regions Doomed?," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 200, Centro Studi Luca d\'Agliano, University of Milano.

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