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Foreign Direct Investment and Agglomeration: Evidence from Italy

  • Raffaello Bronzini

    ()

A number of empirical works analyzed the effect of agglomeration on multinational investment verifying whether agglomerated areas attract foreign direct investment. Despite the large amount of studies, there has been no systematic attempts to disentangle whether FDI are drawn by the concentration of firms within the same sector (specialization) or within different sectors (diversity). Furthermore, the question whether firms’ size of the host area influences multinational investment is still unanswered. This paper provides an empirical evidence on the role of agglomeration economies in attracting foreign direct investments within Italian regions and provinces, distinguishing between specialization and diversity externalities, and on the role of firms’ size in affecting foreign investors’ choices. We employ a new territorial data set on foreign direct investment collected by the Italian Foreign Exchange Office for industrial and service sectors. We find a strong evidence that specialized geographic areas attract FDI, whereas diversified areas draw FDI only for industrial sectors; finally there is little evidence that firm size has an impact on FDI, if anything, only big firms in Southern regions would seem to affect positively foreign investor decisions.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p321.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p321
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  1. Roberto Basile, 2002. "The Locational Determinants of Foreign-Owned Manufacturing Plants in Italy: Preliminary Results," Rivista di Politica Economica, SIPI Spa, vol. 92(4), pages 61-92, July-Augu.
  2. 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.
  3. Paci Raffaele & Usai Stefano, 2000. "The Role of Specialisation and Diversity Externalities in the Agglomeration of Innovative Activities," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 237-268.
  4. Arellano, M. & Honore, B., 2000. "Panel Data Models: Some Recent Developments," Papers 0016, Centro de Estudios Monetarios Y Financieros-.
  5. Barry, Frank & Görg, Holger & Strobl, Eric, 2001. "Foreign Direct Investment, Agglomerations and Demonstration Effects: An Empirical Investigation," CEPR Discussion Papers 2907, C.E.P.R. Discussion Papers.
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  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
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  8. Robert Dekle, 2002. "Industrial Concentration And Regional Growth: Evidence From The Prefectures," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 310-315, May.
  9. repec:rie:review:y:2000:v:2:i:2 is not listed on IDEAS
  10. Sergio Mariotti & Lucia Piscitello, 1995. "Information Costs and Location of FDIs within the Host Country: Empirical Evidence from Italy," Journal of International Business Studies, Palgrave Macmillan, vol. 26(4), pages 815-841, December.
  11. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
  12. Keith Head & John Ries & Deborah Swenson, 1994. "Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States," NBER Working Papers 4767, National Bureau of Economic Research, Inc.
  13. Alberto Baffigi & Antonio Bassanetti, 2004. "Turning-point indicators from business surveys: real-time detection for the euro area and its major member countries," Temi di discussione (Economic working papers) 500, Bank of Italy, Economic Research and International Relations Area.
  14. Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-65, May.
  15. Forni, Mario & Paba, Sergio, 2002. "Spillovers and the Growth of Local Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 151-71, June.
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  17. repec:rie:review:v:5:y:2000:i:2:n:2 is not listed on IDEAS
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