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Economic Institutions and the Location Strategies of European Multinationals in their Geographic Neighborhood

Author

Listed:
  • Andrea Ascani
  • Riccardo Crescenzi
  • Simona Iammarino

Abstract

This article investigates how the location behavior of multinational enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the old fifteen European Union members: new member states, accession and candidate countries, as well as European Neighborhood Policy countries and the Russian Federation. The article aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labor market and business regulation), legal aspects (i.e., protection of property rights and contract enforcement), and the weight of the government in the economy. By employing data on 6888 greenfield investment projects, the random-coefficient mixed logit analysis shows that, although the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs’ preferences over economic institutions are highly heterogeneous across sectors and business functions.

Suggested Citation

  • Andrea Ascani & Riccardo Crescenzi & Simona Iammarino, 2016. "Economic Institutions and the Location Strategies of European Multinationals in their Geographic Neighborhood," Economic Geography, Taylor & Francis Journals, vol. 92(4), pages 401-429, October.
    • Handle: RePEc:taf:recgxx:v:92:y:2016:i:4:p:401-429
    DOI: 10.1080/00130095.2016.1179570
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    Cited by:

    1. Josep Marti, 2020. "Location decisions of heterogeneous European firms," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 265-269.
    2. Tamás Krisztin & Philipp Piribauer, 2021. "A Bayesian spatial autoregressive logit model with an empirical application to European regional FDI flows," Empirical Economics, Springer, vol. 61(1), pages 231-257, July.
    3. Junsong Wang & Yehua Dennis Wei & Bingquan Lin, 2021. "Functional division and location choices of Chinese outward FDI: The case of ICT firms," Environment and Planning A, , vol. 53(5), pages 937-957, August.
    4. Dachs, Bernhard, 2017. "Internationalisation of R&D: A Review of Drivers, Impacts, and new Lines of Research," MPRA Paper 83367, University Library of Munich, Germany.
    5. Tamás Krisztin & Philipp Piribauer, 2023. "A joint spatial econometric model for regional FDI and output growth," Papers in Regional Science, Wiley Blackwell, vol. 102(1), pages 87-106, February.
    6. Andrea Ascani & Riccardo Crescenzi & Simona Iammarino, 2016. "What drives European multinationals to the European Union neighbouring countries? A mixed-methods analysis of Italian investment strategies," Environment and Planning C, , vol. 34(4), pages 656-675, June.
    7. Ascani, Andrea & Nair, Lakshmi Balachandran & Iammarino, Simona, 2023. "Racing to the bottom or seeking legitimacy? National environmental performance and the location strategies of Chinese MNEs," Journal of International Management, Elsevier, vol. 29(2).
    8. Amendolagine, Vito & Crescenzi, Riccardo & Rabellotti, Roberta, 2022. "The geography of acquisitions and greenfield investments: firm heterogeneity and regional institutional conditions," LSE Research Online Documents on Economics 115597, London School of Economics and Political Science, LSE Library.
    9. Roberto Ganau & Andrés Rodríguez‐Pose, 2019. "Do high‐quality local institutions shape labour productivity in Western European manufacturing firms?," Papers in Regional Science, Wiley Blackwell, vol. 98(4), pages 1633-1666, August.
    10. Andrea Ascani & Simona Iammarino, 2020. "Is green always attractive? The location choices of Chinese outward FDI," Discussion Paper series in Regional Science & Economic Geography 2020-08, Gran Sasso Science Institute, Social Sciences, revised Nov 2020.
    11. Hou, Lei & Li, Qi & Wang, Yanfei & Yang, Xintong, 2021. "Wages, labor quality, and FDI inflows: A new non-linear approach," Economic Modelling, Elsevier, vol. 102(C).
    12. Marcel P Timmer & Sébastien Miroudot & Gaaitzen J de Vries, 2019. "Functional specialisation in trade," Journal of Economic Geography, Oxford University Press, vol. 19(1), pages 1-30.
    13. Philip Völlers, 2023. "Mitigating Extra‐Firm Risk Environments – The Case of Turkish Firms in Germany," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 114(3), pages 237-251, July.
    14. Jonas Kleineick & Andrea Ascani & Martijn Smit, 2020. "Multinational investments across Europe: a multilevel analysis," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 40(1), pages 67-105, April.
    15. Liena Kano & Eric W. K. Tsang & Henry Wai-chung Yeung, 2020. "Global value chains: A review of the multi-disciplinary literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 577-622, June.
    16. Niccolo Durazzi, 2015. "Inclusive unions in a dualised labour market? The challenge of organising labour market policy and social protection for labour market outsiders," LEQS – LSE 'Europe in Question' Discussion Paper Series 99, European Institute, LSE.
    17. Ron Boschma & Simona Iammarino & Raffaele Paci & Jordy Suriñach & Andrea Ascani & Riccardo Crescenzi & Simona Iammarino, 2017. "The Geography of Foreign Investments in the EU Neighbourhood," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 108(1), pages 76-91, February.
    18. Yifei Wang & Andrea Ascani & Carolina Castaldi, 2023. "Location choices of Chinese greenfield investments across EU regions: the role of industry and country-of-origin agglomerations," Regional Studies, Taylor & Francis Journals, vol. 57(9), pages 1714-1730, September.
    19. Dalila Ribaudo, 2023. "Tracking the Van: The role of forward linkages in logistics MNEs' location choices across European NUTS 3 regions," Papers in Regional Science, Wiley Blackwell, vol. 102(2), pages 331-362, April.
    20. Simona Iammarino & Andrés Rodriguez-Pose & Michael Storper, 2019. "Regional inequality in Europe: evidence, theory and policy implications," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 273-298.
    21. Marek Csabay & Zuzana Vincúrová & Milan Stoch & Beáta Stehlíková, 2021. "Enterprise ownership patterns in the least developed districts of Slovakia," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(4), pages 807-838, December.
    22. Coveri, Andrea & Paglialunga, Elena & Zanfei, Antonello, 2024. "Global value chains and within-country inequality: The role of functional positioning," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 382-397.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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