Network and Border Effects: Where Do Foreign Multinationals Locate in Germany?

Julia Spies

No 47, IAW Discussion Papers from Institut für Angewandte Wirtschaftsforschung (IAW)

Abstract: This study assesses the determinants of location choices of foreign multinational firms at the level of German federal states. Adjacency and existing firm networks are assumed to influence the investors’ profits in a given location by overcoming informational disadvantages when entering the new market. A conditional and a nested logit model resemble the structure of the location choice process of individual investors well. By using affiliate-level data between 1997 and 2005, the results confirm that firms react positively to local demand, a common border and existing firm networks, while unit labour costs exhibit the expected negative impact. In the sectoral estimations, it is shown that these effects vary in their relevance among manufacturing and service affiliates, and between upstream and downstream activities.

Keywords: Location choice; multinational firms; nested logit model (search for similar items in EconPapers)
JEL-codes: F23 R39 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-03
New Economics Papers: this item is included in nep-net, nep-sbm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.iaw.edu/RePEc/iaw/pdf/iaw_dp_47.pdf (application/pdf)

Related works:
Journal Article: Network and border effects: Where do foreign multinationals locate in Germany? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iaw:iawdip:47

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