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The Location Decisions of Multinationals and the Cultural Link: Evidence from Spanish Direct Investment Abroad

Author

Listed:
  • Juan Miguel Benito-Ostolaza

    (Departamento de Economía-UPNA)

  • Salvador Barrios

    (Directorate-General for Economic and Financial Affairs, European Commission)

Abstract

We examine the way in which differences in language and culture may affect direct investment decisions. We use a discrete choice approach to model the location decisions of multinationals in which cultural links, language differences, distance and market access are accounted for. This model is used to study the determinants of the location decisions of Spanish multinationals over the period 1988-1997. Cultural ties, including language, are found significantly to affect the location decisions of Spanish firms abroad. These ties, also explain the leading position of Spanish multinationals in Latin American countries compared to more advanced home countries such as the US, Germany and the UK. The specific advantage of Spanish multinationals together with the rapid economic development of the Spanish economy, which has traditionally been a large FDI-recipient, tend to corroborate the view that intangible assets such as culture and language proximity do matter in understanding net outward investment patterns.

Suggested Citation

  • Juan Miguel Benito-Ostolaza & Salvador Barrios, 2008. "The Location Decisions of Multinationals and the Cultural Link: Evidence from Spanish Direct Investment Abroad," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0804, Departamento de Economía - Universidad Pública de Navarra.
    • Handle: RePEc:nav:ecupna:0804
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    Cited by:

    1. is not listed on IDEAS
    2. Tokunaga, Masahiro & Suganuma, Keiko & Odagiri, Nami, 2018. "From Russia to Eurasia : Specific Features of the “Russosphere” from the Perspective of Business Activities of Japanese Firms," RRC Working Paper Series 77, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    3. Castillo-Murciego, Ángela & López-Laborda, Julio, 2019. "The effect of double taxation treaties and territorial tax systems on foreign direct investment: Evidence for Spain," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-33.
    4. Jaime Martínez-Martín, 2011. "General equilibrium long-run determinants for Spanish FDI: a spatial panel data approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 2(3), pages 305-333, September.
    5. Ankita Tibrewal & Ad Jong & Geoff Parkes & Helene Tenzer & Melissa Bel-Lahsen, 2024. "Language Operative Capacity in Small and Medium-sized Enterprises," Management International Review, Springer, vol. 64(6), pages 955-989, December.

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    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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