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

Listed author(s):
  • 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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File URL: https://mpra.ub.uni-muenchen.de/73995/1/MPRA_paper_73995.PDF
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 73995.

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Date of creation: 24 Sep 2016
Handle: RePEc:pra:mprapa:73995
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  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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  3. Sridhar, Kala Seetharam & Wan, Guanghua, 2010. "Firm location choice in cities: Evidence from China, India, and Brazil," China Economic Review, Elsevier, vol. 21(1), pages 113-122, March.
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  5. Morris, Sebastian, 2004. "A Study of the Regional Determinants of Foreign Direct Investments in India, and the Case of Gujarat," IIMA Working Papers WP2004-03-07, Indian Institute of Management Ahmedabad, Research and Publication Department.
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  8. Sanjoy Chakravorty & Jun Koo & Somik V Lall, 2005. "Do localization economies matter in cluster formation? Questioning the conventional wisdom with data from Indian metropolises," Environment and Planning A, Pion Ltd, London, vol. 37(2), pages 331-353, February.
  9. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April.
  10. World Bank, 2004. "India : Investment Climate and Manufacturing Industry," World Bank Other Operational Studies 14378, The World Bank.
  11. Derek K. Kellenberg, 2007. "The Provision Of Public Inputs And Foreign Direct Investment," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 170-184, April.
  12. Megha Mukim & Peter Nunnenkamp, 2012. "The Location Choices of Foreign Investors: A District-level Analysis in India," The World Economy, Wiley Blackwell, vol. 35(7), pages 886-918, July.
  13. Sanjoy Chakravorty, 2003. "Industrial location in post-reform India: patterns of inter-regional divergence and intra-regional convergence," Journal of Development Studies, Taylor & Francis Journals, vol. 40(2), pages 120-152.
  14. Lall, Somik V. & Mengistae, Taye, 2005. "The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry," Policy Research Working Paper Series 3664, The World Bank.
  15. Jacob A. Jordaan, 2012. "Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 61-97.
  16. Gilles Duranton, 2008. "Viewpoint: From cities to productivity and growth in developing countries," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 689-736, August.
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