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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

    (ISAE, Rome)

  • Davide Castellani

    (ISE-Università di Urbino)

  • Antonello Zanfei

    (ISE-Università di Urbino)

Abstract

What determines multinational firms’ location choices in Europe? Do national boundaries matter in location decisions? To what extent are European regional policies (Structural and Cohesion Funds) able to mitigate the agglomeration forces at work? Do location determinants differ for EU and US MNEs? In this paper, we address these questions using data from 5,761 foreign subsidiaries established in 55 regions in 8 EU countries over the period 1991-1999 and estimating a nested logit model of location choices. Controlling for regional market size and potential, agglomeration economies and labor markets conditions, we find that EU policy, proxied by Cohesion Fund and Objective 1 eligibility, played a significant role in attracting multinationals. Differences emerge in determinants of EU and US multinationals location choices, with special reference to the role of labor markets. National boundaries do not seem to affect location decisions, with the relevant exception of Italy. Results suggest that multinational firms’ perceive European regions as geo-economic aggregates different from the actual political boundaries of countries.

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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0310001.

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Date of creation: 06 Oct 2003
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Handle: RePEc:wpa:wuwpit:0310001

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Citations

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Cited by:
  1. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.
  2. 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.
  3. Rodrigo Alegria, 2006. "Countries, Regions and Multinational Firms: Location Determinants in the European Union," ERSA conference papers ersa06p143, European Regional Science Association.
  4. Roberto Basile & Davide Castellani & Antonello Zanfei, 2007. "Location choices of multinational firms in Europe: the role of EU cohesion policy," Quaderni del Dipartimento di Economia, Finanza e Statistica 32/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  5. Roberto Basile & Luigi Benfratello & Davide Castellani, 2010. "Location Determinants of Greenfield Foreign Investments in the Enlarged Europe: Evidence from a Spatial Autoregressive Negative Binomial Additive Model," Working papers 10, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  6. 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).
  7. Josep-Maria Arauzo-Carod & Daniel Liviano-Solis & Miguel Manjón-Antolín, 2010. "Empirical Studies In Industrial Location: An Assessment Of Their Methods And Results," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 685-711.
  8. Valentina Meliciani & davide castellani & loredana mirra, 2013. "The Determinants Of Inward Foreign Direct Investment In Business Services Across European Regions," ERSA conference papers ersa13p861, European Regional Science Association.
  9. Siedschlag, Iulia & Zhang, Xiaoheng & Smith, Donal, 2009. "What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector?," Papers DYNREG45, Economic and Social Research Institute (ESRI).
  10. Kokko, Ari & Gustavsson, Patrik, 2004. "Regional integration, foreign direct investment, and regional development," EIB Papers 5/2004, European Investment Bank, Economics Department.
  11. Riess, Armin & Uppenberg, Kristian, 2004. "The internationalisation of production: moving plants, products, and people," EIB Papers 1/2004, European Investment Bank, Economics Department.

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