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Economic institutions and the location strategies of European multinationals in their geographic neighborhood

Andrea Ascani (), Riccardo Crescenzi and Simona Iammarino

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article investigates how the location behavior of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighborhood Policy (ENP) countries and the Russian Federation. The article aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labor market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the random-coefficient Mixed Logit analysis shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.

Keywords: multinational enterprises; economic institutions; location choice; European Union (search for similar items in EconPapers)
JEL-codes: F23 L20 P33 R30 (search for similar items in EconPapers)
Date: 2016-06-06
New Economics Papers: this item is included in nep-cis, nep-geo and nep-int
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Published in Economic Geography, 6, June, 2016, 92(4), pp. 401-429. ISSN: 0013-0095

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Journal Article: Economic Institutions and the Location Strategies of European Multinationals in their Geographic Neighborhood (2016) Downloads
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