Foreign Direct Investment and Agglomeration: Evidence from Italy
AbstractA 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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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p321.
Date of creation: Aug 2004
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Other versions of this item:
- Raffaello Bronzini, 2004. "Foreign direct investment and agglomeration: evidence from Italy," Temi di discussione (Economic working papers) 526, Bank of Italy, Economic Research and International Relations Area.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-09 (All new papers)
- NEP-EEC-2005-11-09 (European Economics)
- NEP-GEO-2005-11-09 (Economic Geography)
- NEP-IFN-2005-11-09 (International Finance)
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