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International Relocation Of Production: Where Do Firms Go?

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  • Leo Sleuwaegen
  • Enrico Pennings

Abstract

The flexible relocation of capacity across countries by multinational enterprises has become an important source of concern. Using a unique sample of relocating firms in Belgium, we find that wages and market potential of host regions are important determinants for the location choice. Considering firm characteristics, we show that large firms have a higher propensity to relocate to remote countries. Public aid only plays a decisive role in the investment decision for relocations to adjacent countries, suggesting a potential harmful role in distorting competition. More proactive policies in line with changing comparative location advantages should be implemented to accommodate relocations.

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  • Leo Sleuwaegen & Enrico Pennings, 2006. "International Relocation Of Production: Where Do Firms Go?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 430-446, September.
    • Handle: RePEc:bla:scotjp:v:53:y:2006:i:4:p:430-446
    DOI: 10.1111/j.1467-9485.2006.00388.x
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