Explaining variability in the investment location choices of MNEs: an exploration of country, industry and firm effects

2016-12-19T13:52:52Z (GMT) by Simona Rasciute Paul Downward
This paper examines the variation in foreign direct investment (FDI) location decisions of European multinational enterprises (MNEs.) An innovative empirical approach is applied to a new data set which contains over 15,000 individual FDI location decisions in 25 European countries over a 17-year period and combines country, industry and firm level factors. The empirical results show that the responsiveness of FDI location choices to country-level factors is heterogeneous both across sectors and across firms of different characteristics as well as unobserved factors. In particular the results show that the importance of the market size, good infrastructure and Western business and legal environment increases with investing firm’s size, while proximity, as well as cultural and linguistic ties are more important for smaller firms.