Pattern and determinants of location decisions by french multinationals in European regions

Abstract

Within a context of increasing competition between countries willing to attract foreign firms for regional development and employment creation prospects, spatial location issues have become a sensitive topic. One of the most noteworthy phenomena in economic geography is the concentration of industrial activities in specific regions despite globalization strategies of the firms. Location theory has provided various explanations of spatial agglomeration. Recent theoretical analysis suggest that different firms within an industry tend to choose similar locations because proximity generates positive externalities. While industrial clustering has been noted at least since A. Marshall, current models shed new light on agglomeration effects. As in recent theoretical and empirical work, we argue that agglomeration economies tend to push firms to cluster together in a self-reinforcing way.Few empirical studies on foreign direct investment have been undertaken at the regional level. Our paper focuses on the location decisions of French multinationals in manufacturing sectors. We use a new database that covers more than 2,000 establishments across 94 regions in the European Union. We use a panel data model to test the regional determinants of location choices. Along with the classical locational advantages, we introduce various variables that capture agglomeration effects. Moreover, transport costs proxies and public policy variables are also considered.

Citation

Ferrer, C. (1998), "Pattern and determinants of location decisions by french multinationals in European regions", Rugman, A.M. and Mucchielli, J.-L. (Ed.) Multinational Location Strategy (Research in Global Strategic Management, Vol. 6), Emerald Group Publishing Limited, Leeds, pp. 117-138. https://doi.org/10.1016/S1064-4857(98)06007-0