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Location choices of multinational firms in Europe: the role of EU cohesion policy

Author Info

  • Roberto Basile
  • Davide Castellani
  • Antonello Zanfei

Abstract

In this paper we examine the determinants of location choices of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. Using data on 5,509 foreign subsidiaries established in 50 regions in 8 EU countries over the period 1991-1999, we estimate a mixed logit model of the determinants of MNFs’ location choices. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non European ones.

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Paper provided by Università di Perugia, Dipartimento Economia in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 32/2007.

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Length: 27 pages
Date of creation: 31 Apr 2007
Date of revision:
Handle: RePEc:pia:wpaper:32/2007
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Keywords: Europe; Foreign Direct Investments; Location Choice; Mixed Logit Models;

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Find related papers by JEL classification:
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
  • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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  1. Roberto Basile & Davide Castellani & Antonello Zanfei, 2003. "Location choices of multinational firms in Europe: the role of national boundaries and EU policy," International Trade 0310001, EconWPA.
  2. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003. "How do Firms Agglomerate? A Study of FDI in France," CEPR Discussion Papers 3873, C.E.P.R. Discussion Papers.
  3. Roberto Basile & Davide Castellani & Antonello Zanfei, 2009. "National boundaries and the location of multinational firms in Europe," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 733-748, November.
  4. Salvador Barrios & Holger Görg & Eric Strobl, 2006. "Multinationals' Location Choice, Agglomeration Economies, and Public Incentives," International Regional Science Review, SAGE Publishing, vol. 29(1), pages 81-107, January.
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  9. Roberto Basile, 2002. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," ISAE Working Papers 27, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
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  13. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
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  15. Castellani, Davide & Zanfei, Antonello, 2004. "Choosing international linkage strategies in the electronics industry: the role of multinational experience," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 447-475, April.
  16. Poirier, Dale J., 1996. "A Bayesian analysis of nested logit models," Journal of Econometrics, Elsevier, vol. 75(1), pages 163-181, November.
  17. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
  18. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January.
  19. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 321-359, October.
  20. Nigel Pain, 2002. "Fiscal Incentives, European Integration and the Location of Foreign Direct Investment," NIESR Discussion Papers 195, National Institute of Economic and Social Research.
  21. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April.
  22. D. Garel Rhys, 2004. "The Motor Industry in an Enlarged EU," The World Economy, Wiley Blackwell, vol. 27(6), pages 877-900, 06.
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