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The Location of Domestic and Foreign Production Affiliates by French Multinational Firms

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  • Ms. Isabelle Mejean
  • Thierry Mayer
  • Benjamin Nefussi

Abstract

Economists interested in location choices usually focus their attention on investments abroad. This neglects the fact that multinational enterprises continue to invest domestically while undertaking foreign expansion. This paper compares investments at home and abroad. Our firm-level dataset shows an important home bias in productive investments. Part of this "excessive" domestic investment is explained by standard determinants of location choices. The interdependence between affiliates of the same industrial group however accounts for the lion's share of the home bias. Moreover, French firms' propensity to invest abroad is positively related to their productivity and the size of their intangible assets.

Suggested Citation

  • Ms. Isabelle Mejean & Thierry Mayer & Benjamin Nefussi, 2010. "The Location of Domestic and Foreign Production Affiliates by French Multinational Firms," IMF Working Papers 2010/022, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2010/022
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    More about this item

    Keywords

    WP; fixed cost; standard deviation; dependent variable; investing firm; Location choice; Multinational firms; Conditional logit model; network variable; firm level; multi-national firm; input-producing firm; production establishment; firm's network; choices of affiliate location; Foreign direct investment; Transnational corporations; Productivity; Logit models; Employment; Europe;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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