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The location choices of multinational firms : the role of internationalization experience and group affiliation

  • Gazaniol, Alexandre
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    This paper investigates whether location choices of multinational firms depend on past export, import or FDI experience on foreign markets, and the experience of other affiliated firms. Using French data, we observe that 95% of new FDIs are preceded by exports in the same country, whereas 73% are preceded by imports. Regardless of locations’ observable and unobservable characteristics, we find that exporting in a given country, and to a smaller extent importing from it, significantly phase is more systematic for investing in distant countries and for first-time investors, whereas import experience is significantly correlated with FDI in low-income countries. Location choices not only depend on the investor’s own international experience, but also on the international experience of other affiliated firms: firms tend to invest in countries where the group already owns a local affiliate, and are more likely to invest in a distant country if other affiliated firms are already exporting there. These findings suggest the existence of coordinated strategies and/or information sharing between affiliated firms.

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    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/9018/1/2012-02.pdf
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    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/9018.

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    Date of creation: 2012
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    Publication status: Published in DIAL Document de travail, 2012
    Handle: RePEc:dau:papers:123456789/9018
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    1. Crozet, M. & Mayer, T. & Micchielli, J.L., 2000. "How Do Firms Agglomerate? A Study of FDI in France?," Papiers d'Economie Mathématique et Applications 2000.50, Université Panthéon-Sorbonne (Paris 1).
    2. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
    3. Defever, Fabrice, 2006. "Functional fragmentation and the location of multinational firms in the enlarged Europe," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 658-677, September.
    4. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
    5. 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.
    6. Thierry Mayer & Isabelle Méjean & Benjamin Nefussi, 2007. "The Location of Domestic and Foreign Production Affiliates by French Multinational Firms," Working Papers 2007-07, CEPII research center.
    7. Egger, Peter & Fahn, Matthias & Merlo, Valeria & Wamser, Georg, 2014. "On the genesis of multinational foreign affiliate networks," Munich Reprints in Economics 20554, University of Munich, Department of Economics.
    8. Benjamin Nefussi & Cyrille Schwellnus, 2007. "Does FDI in Manufacturing Cause FDI in Business Services? Evidence from French Firm-Level Data," Working Papers 2007-21, CEPII research center.
    9. Hector Calvo & Gregory Corcos & Emanuel Ornelas & Facundo Albornoz, 2010. "Sequential Exporting," 2010 Meeting Papers 1065, Society for Economic Dynamics.
    10. James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," NBER Working Papers 7053, National Bureau of Economic Research, Inc.
    11. Thiess Buettner & Martin Ruf, 2007. "Tax incentives and the location of FDI: Evidence from a panel of German multinationals," International Tax and Public Finance, Springer, vol. 14(2), pages 151-164, April.
    12. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    13. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan, vol. 8(1), pages 23-32, March.
    14. Fabrice Defever & Jean-Louis Mucchielli, 2005. "Décomposition internationale de la chaîne de valeur. Une étude de la localisation des firmes multinationales dans l'Union européenne élargie," Revue économique, Presses de Sciences-Po, vol. 56(6), pages 1185-1205.
    15. Basile, Roberto & Castellani, Davide & Zanfei, Antonello, 2008. "Location choices of multinational firms in Europe: The role of EU cohesion policy," Journal of International Economics, Elsevier, vol. 74(2), pages 328-340, March.
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