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

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  • Mataloni, Raymond

Abstract

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.

Suggested Citation

  • Mataloni, Raymond, 2007. "Do U.S. Multinationals Engage In Sequential Choice?: Evidence from New Manufacturing Operations in Europe," MPRA Paper 20195, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20195
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    File URL: https://mpra.ub.uni-muenchen.de/20195/1/MPRA_paper_20195.pdf
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    References listed on IDEAS

    as
    1. Grether, David & Wilde, Louis, 1984. " An Analysis of Conjunctive Choice: Theory and Experiments," Journal of Consumer Research, Oxford University Press, vol. 10(4), pages 373-385, March.
    2. 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 Publishing.
    3. 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.
    4. Subramanian Rangan, 2000. "Search and Deliberation in International Exchange: Microfoundations to Some Macro Patterns," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(2), pages 205-222, June.
    5. 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.
    6. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    7. 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.
    8. Park, C Whan & Lessig, V Parker, 1981. " Familiarity and Its Impact on Consumer Decision Biases and Heuristics," Journal of Consumer Research, Oxford University Press, vol. 8(2), pages 223-230, September.
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    More about this item

    Keywords

    nested logit; multinational companies; location choice;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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