IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Foreign Direct Investment, Agglomerations and Demonstration Effects - An Empirical Investigation

  • Frank Barry

    (University College Dublin)

  • Holger Görg

    (University of Nottingham)

  • Eric Strobl

    (University College Dublin)

Many previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. What has been missing in this literature thus far, however, is an investigation into the reasons why industry clusters attract firms. We distinguish between “efficiency agglomerations” as firms locating close to each other because they can increase their efficiency by doing so, and “demonstration effects”, whereby existing firms send signals to new investors as to the reliability of the host country and newly entering firms follow previous firms. In this paper we try to disentangle these two effects, by examining the location of US and UK firms in Ireland. We calculate proxies for “efficiency agglomerations” and “demonstration effects” and include these proxies in an empirical model of the location decision of firms. For US firms, we find that both efficiency agglomeration and demonstration effects are important determinants of entry. For UK firms, however, the evidence is not as clear cut.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ucd.ie/economics/research/papers/2001/WP01.04.pdf
File Function: First version, 2001
Download Restriction: no

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200104.

as
in new window

Length: 26 pages
Date of creation: 08 Mar 2001
Date of revision:
Handle: RePEc:ucn:wpaper:200104
Contact details of provider: Postal: UCD, Belfield, Dublin 4
Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
  2. Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 539-561, September.
  3. Girma, Sourafel, 2002. "The Process of European Integration and the Determinants of Entry by Non-EU Multinationals in UK Manufacturing," Manchester School, University of Manchester, vol. 70(3), pages 315-35, June.
  4. Cletus C. Coughlin & Eran Segev, 2000. "Location Determinants of New Foreign-Owned Manufacturing Plants," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 323-351.
  5. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  6. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  7. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
  8. Holger G–rg & Eric Strobl, 2003. "Multinational Companies, Technology Spillovers and Plant Survival," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 581-595, December.
  9. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  10. Barry, Frank & Bradley, John, 1997. "FDI and Trade: The Irish Host-Country Experience," Economic Journal, Royal Economic Society, vol. 107(445), pages 1798-1811, November.
  11. Pavelin, S., 2000. "The Geographical Diversification of Leading Firm in the EU," Papers 00/15, College Dublin, Department of Political Economy-.
  12. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  13. Barrell, Ray & Pain, Nigel, 1999. "Domestic institutions, agglomerations and foreign direct investment in Europe," European Economic Review, Elsevier, vol. 43(4-6), pages 925-934, April.
  14. Nigel Driffield & Max Munday, 2000. "Industrial Performance, Agglomeration, and Foreign Manufacturing Investment in the UK," Journal of International Business Studies, Palgrave Macmillan, vol. 31(1), pages 21-37, March.
  15. DeCoster Gregory P. & Strange William C., 1993. "Spurious Agglomeration," Journal of Urban Economics, Elsevier, vol. 33(3), pages 273-304, May.
  16. Frances Ruane & Ali Ugur, 2002. "Foreign Direct Investment And Productivity Spillovers In The Irish Manufacturing Industry: Evidence From Firm Level Panel Data," Trinity Economics Papers 20026, Trinity College Dublin, Department of Economics.
  17. Kearns, Allan & Ruane, Frances, 2001. "The tangible contribution of R&D-spending foreign-owned plants to a host region: a plant level study of the Irish manufacturing sector (1980-1996)," Research Policy, Elsevier, vol. 30(2), pages 227-244, February.
  18. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Görg, Holger & Strobl, Eric, 2002. "Multinational Companies and Indigenous Development: An Empirical Analysis," CEPR Discussion Papers 3325, C.E.P.R. Discussion Papers.
  20. Ronald W. Jones, 1980. "Comparative and Absolute Advantage," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 116(III), pages 235-260, September.
  21. Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
  22. Ottaviano, Gianmarco & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  23. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:200104. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicolas Clifton)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.