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Location choices of multinational firms in Europe: the role of national boundaries and EU policy

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  • Roberto Basile
  • Davide Castellani
  • Antonello Zanfei

Abstract

We examine the determinants of multinational firmsÂ’ location choices in Europe by estimating a nested logit model on a data-set of 5,761 foreign subsidiaries established in 55 regions in 8 EU countries over the period 1991-1999. We find that firms perceive regions across different countries as more similar than regions within national borders. This might be revealing that the process of European integration has reduced the national specificities perceived by multinationals and that regions within Europe compete to attract FDIs more across than within countries. Controlling for regional market size and potential, agglomeration economies and labor markets conditions, we also find that EU regional policy, captured by Cohesion Funds and Objective 1 eligibility, played a significant role in attracting multinationals, thus mitigating the agglomeration forces at work. Differences emerge in determinants of EU and US multinationals location choices, with special reference to the role of labor markets.

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  • Roberto Basile & Davide Castellani & Antonello Zanfei, 2004. "Location choices of multinational firms in Europe: the role of national boundaries and EU policy," ERSA conference papers ersa04p37, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa04p37
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    Cited by:

    1. Frances Ruane & Xiaoheng Zhang, 2007. "Where do MNEs Expand Production: Location Choices of the Pharmaceutical Industry in Europe after 1992," Papers WP211, Economic and Social Research Institute (ESRI).
    2. Davide Castellani & Valentina Meliciani & Loredana Mirra, 2016. "The Determinants of Inward Foreign Direct Investment in Business Services across European Regions," Regional Studies, Taylor & Francis Journals, vol. 50(4), pages 671-691, April.
    3. Josep‐Maria Arauzo‐Carod & Daniel Liviano‐Solis & Miguel Manjón‐Antolín, 2010. "Empirical Studies In Industrial Location: An Assessment Of Their Methods And Results," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 685-711, August.
    4. Siedschlag, Iulia & Zhang, Xiaoheng & Smith, Donal, 2009. "What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector?," Papers DYNREG45, Economic and Social Research Institute (ESRI).
    5. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 319-319, January-F.
    6. Lammertjan Dam & Bert Scholtens & Elmer Sterken, 2007. "Corporate Governance and International Location Decisions of Multinational Enterprises," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1330-1347, November.
    7. Rodrigo Alegria, 2006. "Countries, Regions and Multinational Firms: Location Determinants in the European Union," ERSA conference papers ersa06p143, European Regional Science Association.
    8. Kokko, Ari & Gustavsson, Patrik, 2004. "Regional integration, foreign direct investment, and regional development," EIB Papers 5/2004, European Investment Bank, Economics Department.
    9. Chandra R. Bhat & Rajesh Paleti & Palvinder Singh, 2014. "A Spatial Multivariate Count Model For Firm Location Decisions," Journal of Regional Science, Wiley Blackwell, vol. 54(3), pages 462-502, June.
    10. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.
    11. Jonathan Jones, 2017. "Agglomeration economies and the location of foreign direct investment: A meta-analysis," Journal of Regional Science, Wiley Blackwell, vol. 57(5), pages 731-757, November.
    12. Nalin Kumar Ramaul & Pinki Ramaul, 2018. "Regional Incentives and Location Choice of New Firms in India: A Nested Logit Model," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 501-525, June.
    13. repec:tur:wpaper:10 is not listed on IDEAS
    14. Calá, Carla Daniela, 2009. "Spatial issues on firm demography: an analysis for Argentina," Nülan. Deposited Documents 1379, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    15. Norifumi Kawai, 2011. "The Role of Institutional Conditions in Japanese FDI in European Transition Economies," Chapters, in: Werner Pascha & Cornelia Storz & Markus Taube (ed.), Institutional Variety in East Asia, chapter 11, Edward Elgar Publishing.
    16. Riess, Armin & Uppenberg, Kristian, 2004. "The internationalisation of production: moving plants, products, and people," EIB Papers 1/2004, European Investment Bank, Economics Department.
    17. Basile, Roberto & Castellani, Davide & Zanfei, Antonello, 2008. "Location choices of multinational firms in Europe: The role of EU cohesion policy," Journal of International Economics, Elsevier, vol. 74(2), pages 328-340, March.
    18. Werner Pascha & Cornelia Storz & Markus Taube (ed.), 2011. "Institutional Variety in East Asia," Books, Edward Elgar Publishing, number 14221.

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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