Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation
Many previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. What has been missing in this literature thus far, however, is an investigation into the reasons why industry clusters attract firms. We distinguish between “efficiency agglomerations” as firms locating close to each other because they can increase their efficiency by doing so, and “demonstration effects”, whereby existing firms send signals to new investors as to the reliability of the host country and newly entering firms follow previous firms. In this paper we try to disentangle these two effects, by examining the location of US and UK firms in Ireland. We calculate proxies for “efficiency agglomerations” and “demonstration effects” and include these proxies in an empirical model of the location decision of firms. For US firms, we find that both efficiency agglomeration and demonstration effects are important determinants of entry. For UK firms, however, the evidence is not as clear cut.
(This abstract was borrowed from another version of this item.)
Volume (Year): 139 (2003)
Issue (Month): 4 (December)
|Contact details of provider:|| Postal: |
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page: http://link.springer.de/link/service/journals/10290/index.htm
More information through EDIRC
|Order Information:||Web: http://link.springer.de/orders.htm|
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.:
- Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 539-561, September.
- Barrell, Ray & Pain, Nigel, 1999. "Domestic institutions, agglomerations and foreign direct investment in Europe," European Economic Review, Elsevier, vol. 43(4-6), pages 925-934, April.
- DeCoster Gregory P. & Strange William C., 1993. "Spurious Agglomeration," Journal of Urban Economics, Elsevier, vol. 33(3), pages 273-304, May.
- Krugman, Paul & Venables, Anthony J, 1993.
"Integration, Specialization and Adjustment,"
CEPR Discussion Papers
886, C.E.P.R. Discussion Papers.
- Ottaviano, Gianmarco & Puga, Diego, 1997.
"Agglomeration in the Global Economy: A Survey of the 'New Economic Geography',"
CEPR Discussion Papers
1699, C.E.P.R. Discussion Papers.
- Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
- Nigel Driffield & Max Munday, 2000. "Industrial Performance, Agglomeration, and Foreign Manufacturing Investment in the UK," Journal of International Business Studies, Palgrave Macmillan, vol. 31(1), pages 21-37, March.
- Krugman, Paul & Venables, Anthony J., 1995.
"Globalization and the Inequality of Nations,"
Working Paper Series
430, Research Institute of Industrial Economics.
- Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
- Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
- Fujita, Masahisa & Thisse, Jacques-Francois, 1996.
"Economics of Agglomeration,"
Journal of the Japanese and International Economies,
Elsevier, vol. 10(4), pages 339-378, December.
- Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP 1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
- Barry, Frank & Bradley, John, 1997.
"FDI and Trade: The Irish Host-Country Experience,"
Royal Economic Society, vol. 107(445), pages 1798-1811, November.
- Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
- Steve J. Davis & John Haltiwanger, 1991.
"Gross job creation, gross job destruction and employment reallocation,"
Working Paper Series, Macroeconomic Issues
91-5, Federal Reserve Bank of Chicago.
- Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
- Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, 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.
- 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.
- Frances Ruane & Ali Ugur, 2002. "Foreign Direct Investment And Productivity Spillovers In The Irish Manufacturing Industry: Evidence From Firm Level Panel Data," Trinity Economics Papers 20026, Trinity College Dublin, Department of Economics.
- Cletus C. Coughlin & Eran Segev, 1997.
"Location determinants of new foreign-owned manufacturing plants,"
1997-018, Federal Reserve Bank of St. Louis.
- Cletus C. Coughlin & Eran Segev, 2000. "Location Determinants of New Foreign-Owned Manufacturing Plants," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 323-351.
- Ronald W. Jones, 1980. "Comparative and Absolute Advantage," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 116(III), pages 235-260, September.
- Holger G–rg & Eric Strobl, 2003.
"Multinational Companies, Technology Spillovers and Plant Survival,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 105(4), pages 581-595, December.
- Holger Görg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers, and Plant Survival," Discussion Papers of DIW Berlin 366, DIW Berlin, German Institute for Economic Research.
- Kearns, A & Ruane, F, 1999.
"The Tangible Contribution of R&D Spending Foreign-Owned Plants to a Host Region: a Plant Level Study of the Irish Manufacturing Sector (1980-1996),"
Trinity Economics Papers
997, Trinity College Dublin, Department of Economics.
- Kearns, Allan & Ruane, Frances, 2001. "The tangible contribution of R&D-spending foreign-owned plants to a host region: a plant level study of the Irish manufacturing sector (1980-1996)," Research Policy, Elsevier, vol. 30(2), pages 227-244, February.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- 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.
- Görg, Holger & Strobl, Eric, 2002.
"Multinational Companies and Indigenous Development: An Empirical Analysis,"
CEPR Discussion Papers
3325, C.E.P.R. Discussion Papers.
- Gorg, Holger & Strobl, Eric, 2002. "Multinational companies and indigenous development: An empirical analysis," European Economic Review, Elsevier, vol. 46(7), pages 1305-1322, July.
- Pavelin, S., 2000. "The Geographical Diversification of Leading Firm in the EU," Papers 00/15, College Dublin, Department of Political Economy-.
- Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
- Girma, Sourafel, 2002. "The Process of European Integration and the Determinants of Entry by Non-EU Multinationals in UK Manufacturing," Manchester School, University of Manchester, vol. 70(3), pages 315-35, June.
- Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
When requesting a correction, please mention this item's handle: RePEc:spr:weltar:v:139:y:2003:i:4:p:583-600. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.