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National boundaries and the location of multinational firms in Europe

Author

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  • Roberto Basile
  • Davide Castellani
  • Antonello Zanfei

Abstract

Using data on 5,102 subsidiaries established in the period 1991–1999, we examine the location choice of multinational firms of different nationalities in 47 regions of five EU countries. In particular we estimate a nested logit model and find that European multinationals consider regions across different countries as relatively closer substitutes than regions within national borders. This is consistent with the hypothesis that European regions compete to attract foreign direct investments relatively more across than within countries. However, in line with previous studies, we also find that national boundaries still play some role in choices made by non‐European multinationals. Resumen Utilizando datos de 5,102 empresas filiales establecidas en el periodo 1991–1999, examinamos la elección de la localización de empresas multinacionales de nacionalidades diferentes en 47 regiones de cinco países de la UE. En particular estimamos un modelo logit anidado y encontramos que las multinacionales europeas consideran las regiones entre países diferentes como sustitutas relativamente más cercanas que las regiones dentro de las fronteras nacionales. Esto es consistente con la hipótesis de que las regiones europeas compiten relativamente más entre sí para atraer inversión extranjera directa que entre países. Sin embargo, en consonancia con estudios previos, encontramos también que las fronteras nacionales aun juegan cierto papel en la elección por parte de multinacionales no europeas.

Suggested Citation

  • Roberto Basile & Davide Castellani & Antonello Zanfei, 2009. "National boundaries and the location of multinational firms in Europe," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 733-748, November.
  • Handle: RePEc:bla:presci:v:88:y:2009:i:4:p:733-748
    DOI: 10.1111/j.1435-5957.2009.00238.x
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