Where do foreign firms locate in transition Countries? An empirical investigation

Fazia Pusterla and Laura Resmini

No 20, ISLA Working Papers from ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy

Abstract: In this paper, we utilize firm-level data on foreign firm manufacturing plants in four Central and Eastern European Countries, in order to trace their location and estimate the determinants of their choice processes. At this purpose, we use a nested logit model as developed by McFadden (1974). Several reasons explain the need for mapping FDI. First of all, this would help to understand the real competitiveness of regions and countries in providing location advantages able to complement MNEs’ organisational and internalisation advantages. Secondly, it would directly show the distribution of the benefits usually associated with FDI. Finally, an understanding of FDI location decisions is important for policy makers who believe that MNEs may offer a positive contribution to the economic development of disadvantage areas and thus correct potential regional imbalances. Main results show that sector specific factors affect the choice of final location. These unobserved characteristics influence both the determinants and the structure of MNEs location choice process.

Keywords: foreign direct investment; location choice; transition countries (search for similar items in EconPapers)
JEL-codes: F23 R38 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005-06, Revised 2005-09
New Economics Papers: this item is included in nep-dcm and nep-geo
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Citations: View citations in EconPapers (55)

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