Countries, Regions and Multinational Firms: Location Determinants in the European Union
AbstractEuropean economic integration and its enlargement phases foster the flows of international investments. This explains why the spatial distribution of economic activity is to an increasing extent determined by the location decisions of multinational firms (MNEs). Therefore, from a regional economy perspective, the geography of multinational activity is a policy concern for regional and local authorities. Not only does foreign activity have several contributions and implications for the regional economic development but also understanding the location process of these economic activities is crucial for adequate policy responses. This paper analyses the location decisions of European multinational firms across European countries (25) and regions (NUTS2). An emphasis is placed on whether location determinants for MNEs either change, or if not, which one dominates, at different spatial levels. We expect to find that agglomeration and dispersion forces behave in a different fashion depending on whether country or regional geographical scales are taken into consideration. We seek to explain how economic integration causes some multinational activity to locate in peripheral countries meaning a dispersion process at a supranational scale. The experience of Spain and Portugal in 1986, and more recently CEE countries, confirms this. They have received huge amounts of FDI coming from European countries. However, when the location decision is considered within a country, agglomeration tendencies come to dominate. The regions more developed within the host country attract the majority of these foreign inflows. With the recently incorporation of the knowledge capital model into a New Economic Geography (NEG) setting the links between multinational production and agglomeration are theoretically considered. But NEG setting seems to be scale independent. The same framework is used for analysing regional, urban and international issues. Then, an empirical test is necessary in order to account for these geographical scale differences. Empirically, we use a range of discrete choice models for location choices of MNEs across Europe. The independent variables are grouped into four categories: market access, labour market, agglomeration and others. The first results seem to confirm our hypothesis of a different behaviour of the location determinants depending on the geographical scale taken into consideration.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p143.
Date of creation: Aug 2006
Date of revision:
Contact details of provider:
Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-14 (All new papers)
- NEP-DCM-2007-01-14 (Discrete Choice Models)
- NEP-GEO-2007-01-14 (Economic Geography)
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.:
- Jaime Turrión & Francisco J. Velázquez, 2004. "Consequences of European Union Enlargement for Spain," The World Economy, Wiley Blackwell, vol. 27(6), pages 761-780, 06.
- J. Peter Neary, 2000.
"Of Hype and Hyperbolas - Introducing the new Economic Geography,"
200019, School Of Economics, University College Dublin.
- J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
- Combes, Pierre-Philippe & Overman, Henry G., 2004.
"The spatial distribution of economic activities in the European Union,"
Handbook of Regional and Urban Economics,
in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 64, pages 2845-2909
- Pierre-Philippe Combes & Henry G. Overman, 2003. "The spatial distribution of economic activities in the European Union," LSE Research Online Documents on Economics 20023, London School of Economics and Political Science, LSE Library.
- Pierre-Philippe Combes & Henry Overman, 2003. "The Spatial Distribution of Economic Activities in the European Union," CEP Discussion Papers dp0587, Centre for Economic Performance, LSE.
- Roberto Basile & Davide Castellani & Antonello Zanfei, 2004.
"Location choices of multinational firms in Europe: the role of national boundaries and EU policy,"
ERSA conference papers
ersa04p37, European Regional Science Association.
- Roberto Basile & Davide Castellani & Antonello Zanfei, 2003. "Location choices of multinational firms in Europe: the role of national boundaries and EU policy," International Trade 0310001, EconWPA.
- Roberto Basile & Davide Castellani, 2003. "Location Choices of Multinational Firms in Europe: the Role of National Bourdaries and EU Policy," Development Working Papers 183, Centro Studi Luca d\'Agliano, University of Milano.
- Roberto Basile, 2002.
"Acquisition versus greenfield investment: the location of foreign manufacturers in Italy,"
ISAE Working Papers
27, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
- 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.
- Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
- Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003.
"How do Firms Agglomerate? A Study of FDI in France,"
CEPR Discussion Papers
3873, C.E.P.R. Discussion Papers.
- Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
- Matthieu Crozet & Thierry Mayer & Jean-Louis Mucchielli, 2004. "How do firms agglomerate? A study of FDI in france," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
- Crozet, M. & Mayer, T. & Micchielli, J.L., 2000. "How Do Firms Agglomerate? A Study of FDI in France?," Papiers d'Economie MathÃÂ©matique et Applications 2000.50, UniversitÃ© PanthÃ©on-Sorbonne (Paris 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.
- James R. Markusen, 2004.
"Multinational Firms and the Theory of International Trade,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262633078, December.
- Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
- Keith Head & John Ries & Deborah Swenson, 1994.
"Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States,"
NBER Working Papers
4767, National Bureau of Economic Research, Inc.
- Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
- Frank Barry, 2004. "Enlargement and the EU Periphery: Introduction," The World Economy, Wiley Blackwell, vol. 27(6), pages 753-759, 06.
- Jasminka Sohinger, 2005. "Growth and Convergence in European Transition Economies : The Impact of Foreign Direct Investment," Eastern European Economics, M.E. Sharpe, Inc., vol. 43(2), pages 73-94, March.
- Puga, Diego, 1999.
"The rise and fall of regional inequalities,"
European Economic Review,
Elsevier, vol. 43(2), pages 303-334, February.
- Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
- Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
- Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
- Disdier, Anne-Celia & Mayer, Thierry, 2004.
"How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe,"
Journal of Comparative Economics,
Elsevier, vol. 32(2), pages 280-296, June.
- Anne-Celia Disdier & Thierry Mayer, 2003. "How Different is Eastern Europe? Structure and Determinants of Location Choices by French Firms in Eastern and Western Europe," Working Papers 2003-13, CEPII research center.
- DeCoster Gregory P. & Strange William C., 1993. "Spurious Agglomeration," Journal of Urban Economics, Elsevier, vol. 33(3), pages 273-304, May.
- Philip McCann & Ram Mudambi, 2005. "Analytical differences in the economics of geography: the case of the multinational firm," Environment and Planning A, Pion Ltd, London, vol. 37(10), pages 1857-1876, October.
- Head, Charles Keith & Mayer, Thierry, 2002.
"Market Potential and the Location of Japanese Investment in the European Union,"
CEPR Discussion Papers
3455, C.E.P.R. Discussion Papers.
- 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, November.
- Raybaudi Massilia, M., 1995.
"Economic geography and multinational enterprise,"
Discussion Paper Series In Economics And Econometrics
9520, Economics Division, School of Social Sciences, University of Southampton.
- McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
- Fujita, Masahisa & Mori, Tomoya & Henderson, J. Vernon & Kanemoto, Yoshitsugu, 2004. "Spatial distribution of economic activities in Japan and China," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 65, pages 2911-2977 Elsevier.
- Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier).
If references are entirely missing, you can add them using this form.