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Do U.S. Multinationals Engage In Sequential Choice?: Evidence from New Manufacturing Operations in Europe

  • Mataloni, Raymond
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    Despite an extensive literature on the determinants of the foreign location choices by multinational companies, researchers have only recently begun to systematically examine how these companies form their location consideration sets. When considering new foreign locations, do firms evaluate the attributes of the alternatives at the national level, the sub-national regional level, at some other level of geographical aggregation, or using some combination of these? This paper employs discrete choice models to examine how U.S. multinational companies form their location consideration sets and to identify some of the relevant location attributes. The results indicate that U.S. firms tend to employ a sequential, or hierarchical, decision-making process in which a host country is first chosen based on one set of attributes and then a region within that country is chosen based on another set of attributes. The relevant location attributes include industrial agglomeration and labor market conditions.

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    File URL: http://mpra.ub.uni-muenchen.de/20195/1/MPRA_paper_20195.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20195.

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    Date of creation: 14 Nov 2007
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    Handle: RePEc:pra:mprapa:20195
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    1. Volker Nocke & Stephen Yeaple, 2008. "An Assignment Theory of Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 529-557.
    2. Park, C Whan & Lessig, V Parker, 1981. " Familiarity and Its Impact on Consumer Decision Biases and Heuristics," Journal of Consumer Research, University of Chicago Press, vol. 8(2), pages 223-30, September.
    3. Subramanian Rangan, 2000. "Search and Deliberation in International Exchange: Microfoundations to Some Macro Patterns," Journal of International Business Studies, Palgrave Macmillan, vol. 31(2), pages 205-222, June.
    4. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
    5. Grether, David & Wilde, Louis, 1984. " An Analysis of Conjunctive Choice: Theory and Experiments," Journal of Consumer Research, University of Chicago Press, vol. 10(4), pages 373-85, March.
    6. Hideki Yamawaki, 2006. "The location of American and Japanese multinationals in Europe," International Economics and Economic Policy, Springer, vol. 3(2), pages 157-173, November.
    7. Jean-Louis Muchielli & Florence Puech, 2004. "Globalization, agglomeration and FDI location: the case of French firms in Europe," Chapters, in: Multinational Firms’ Location and the New Economic Geography, chapter 2 Edward Elgar.
    8. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
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