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Determinants of firm location choice in metropolitan cities in India: A binary Logit model analysis


  • Tripathi, Sabyasachi
  • Kumar, Shamika


The present paper tries to investigate the economic determinants of firm location choice in the metropolitan/large cities in India by considering firm those are using FDI (i.e., more than 10 percent of foreign investment) in 2012-13. For the analysis binary Logit model is used in this paper by taking firm level data from Capital Line database, Prowess database provided by CMIE (Centre for Monitoring Indian Economy) and Ace Equity plus database. The empirical estimations shows that total value of output, capital, and exports have a negative effect on firm location choice in the large cities. On the other hand, total value of working capital, operating profits, age of the firm, fixed assets, material cost, and sales of a firm have a positive effect on firm location choice in the large cities in India. However, the effect of percentage of FDI and total value of imports is found to be statistically insignificant on the firm‘s location choice. Finally, the paper discusses several policies in terms of location choice of firms in the large cities such as higher level of infrastructure investment, etc. for higher and sustainable industry lead urban development in India.

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  • Tripathi, Sabyasachi & Kumar, Shamika, 2016. "Determinants of firm location choice in metropolitan cities in India: A binary Logit model analysis," MPRA Paper 73995, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:73995

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    References listed on IDEAS

    1. Somik Vinay Lall & Sanjoy Chakravorty, 2005. "Industrial Location and Spatial Inequality: Theory and Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 47-68, February.
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    More about this item


    Location choice; firm location; Metropolitan cities; India;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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