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Location choices of multinational firms in Europe: the role of national boundaries and EU policy

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Roberto Basile ()
Davide Castellani ()
Antonello Zanfei ()

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Abstract

We examine the determinants of multinational firms’ location choices in Europe by estimating a nested logit model on a data-set of 5,761 foreign subsidiaries established in 55 regions in 8 EU countries over the period 1991-1999. We find that firms perceive regions across different countries as more similar than regions within national borders. This might be revealing that the process of European integration has reduced the national specificities perceived by multinationals and that regions within Europe compete to attract FDIs more across than within countries. Controlling for regional market size and potential, agglomeration economies and labor markets conditions, we also find that EU regional policy, captured by Cohesion Funds and Objective 1 eligibility, played a significant role in attracting multinationals, thus mitigating the agglomeration forces at work. Differences emerge in determinants of EU and US multinationals location choices, with special reference to the role of labor markets.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p37.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p37

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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. Frances Ruane & Xiaoheng Zhang, 2007. "Where do MNEs Expand Production: Location Choices of the Pharmaceutical Industry in Europe after 1992," Papers WP211, Economic and Social Research Institute (ESRI). [Downloadable!]
  2. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association. [Downloadable!]
  3. Rodrigo Alegria, 2006. "Countries, Regions and Multinational Firms: Location Determinants in the European Union," ERSA conference papers ersa06p143, European Regional Science Association. [Downloadable!]
  4. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: are Italian Regions Doomed?," Development Working Papers 200, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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