Colocation Patterns of Foreign-Owned Firms in a Small Open Economy: Evidence from the Netherlands

Abstract

This research addresses the colocation or agglomeration patterns of foreign-owned firms in the small open economy of the Netherlands. The empirical evidence shows that foreignowned firms exhibit different regional colocation patterns than domestic firms for the following industries: mining, construction, transport and communications, services, and trade industry across the 12 Dutch provinces. In the agriculture industry, forestry and fishing industry, and the manufacturing industry the colocation patterns of the domestics and foreign-owned firms are similar. Empirical results also validate that firm size affects the agglomeration behaviour of foreign-owned firms; large foreign companies exhibit different collocation blueprints than smaller and, medium-sized enterprises. Related to industry, large foreign-owned firms target mainly the trade industry and the manufacturing industry. Results confirm that young established foreignowned firms exhibit similar colocation patterns around older, more experienced foreign counterparts in the host economy. Furthermore, the colocation patterns of foreign-owned firms vary also according to different home countries. Firms coming from countries in proximity with the host economy reveal different colocation patterns than firms coming from more distanced countries. Our results strengthen the theoretical argumentation line that foreign-owned firms value location attributes differently depending on firm characteristics and they also exhibit a different location pattern than domestic counterparts.

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