How do Firms Agglomerate? A Study of FDI in France
This Paper studies the determinants of location choice by foreign investors in France. A new sample of almost 4000 location choices over ten years and 92 administrative locations is used to measure two important issues: To what extent do foreign investors cluster spatially and are the decision-makers sensitive to investment incentives provided through regional policies? Concerning the agglomeration effects, we find very strong evidence of positive spillovers between firms and identify detailed patterns of clustering assessing for instance the countries of origin and the industries for which those spillovers are the most substantial. Concerning regional policies, we find very little evidence of any positive impact of either the national or European regional policy on location choices. Finally, we identify for some European countries a ‘learning process’ of foreign direct investment, the location decisions gradually becoming more remote from the country of origin during the period we study.
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