IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Functional fragmentation and the location of multinational firms in the enlarged Europe

Despite the recent advances in the theory of location, the analysis of the role of services surrounding production activity has been largely neglected. This paper analyzes the co-location of a multinational firm's value chain in the enlarged European Union. Depending on its particular characteristics, each function (or activity) would favor different country characteristic. Opposing this dispersion force, vertical linkages between stages can encourage firms to co-locate different activities in the same country. We use recently collected individual firm data on almost 11 000 location choices for a 5 years period and 23 countries. We analyze the determinants of location choice for each activity, including sectoral and functional agglomeration variables. We also illuminate the co-location of functions at the firm level, specifically that of R&D and production.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla06052.

in new window

Length: 27 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:mse:wpsorb:bla06052
Contact details of provider: Postal:
106 - 112 boulevard de l'Hôpital, 75647 Paris cedex 13

Phone: 01 44 07 81 00
Fax: 01 44 07 81 09
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
  2. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  3. James Markusen, 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," NBER Working Papers 11827, National Bureau of Economic Research, Inc.
  4. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  5. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," Manchester School, University of Manchester, vol. 70(3), pages 291-314, June.
  6. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt1j6814b3, University of California Transportation Center.
  7. Thomas J. Holmes & John J. Stevens, 2004. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(3), pages 227-250, June.
  8. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2001. "Expansion Strategies of U.S. Multinational Firms," BEA Papers 0012, Bureau of Economic Analysis.
  9. Anne-Célia Disdier & Thierry Mayer, 2004. "How Different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00268769, HAL.
  10. Davis, James C. & Henderson, J. Vernon, 2008. "The agglomeration of headquarters," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 445-460, September.
  11. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, September.
  12. Eric Maurin & David Thesmar, 2001. "Change in the Functional Structure of Firms and the Demand for Skill," Working Papers 2001-09, Centre de Recherche en Economie et Statistique.
  13. 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.
  14. Grossman, Gene & Helpman, Elhanan & Szeidl, Adam, 2004. "Optimal Integration: Strategies for the Multinational Firm," CEPR Discussion Papers 4477, C.E.P.R. Discussion Papers.
  15. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  16. repec:hhs:iuiwop:430 is not listed on IDEAS
  17. Strauss-Kahn, Vanessa & Vives, Xavier, 2006. "Why and where do headquarters move?," IESE Research Papers D/650, IESE Business School.
  18. Gilles Duranton & Diego Puga, 2001. "From sectoral to functional urban specialisation," Working Papers dpuga-01-01, University of Toronto, Department of Economics.
  19. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2007. "Export-Platform Foreign Direct Investment," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 776-795, 06.
  20. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Post-Print hal-01020551, HAL.
  21. D. McFadden & J. Hausman, 1981. "Specification Tests for the Multinominal Logit Model," Working papers 292, Massachusetts Institute of Technology (MIT), Department of Economics.
  22. Paulo Guimarães & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
  23. 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.
  24. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
  25. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September.
  26. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  27. Kenney, Martin & Florida, Richard, 1994. "Japanese maquiladoras: Production organization and global commodity chains," World Development, Elsevier, vol. 22(1), pages 27-44, January.
  28. Smith Jr. , Donald F. & Florida Richard, 1994. "Agglomeration and Industrial Location: An Econometric Analysis of Japanese-Affiliated Manufacturing Establishments in Automotive-Related Industries," Journal of Urban Economics, Elsevier, vol. 36(1), pages 23-41, July.
  29. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  30. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mse:wpsorb:bla06052. 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: (Lucie Label)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.