Natural-Resource or Market-Seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper conducts an empirical study of the factors that affect the spatial distribution of foreign direct investment (FDI) across regions in Russia; in particular, this paper is concerned with those regions that are endowed with natural resources and marketrelated benefits. Our analysis employs data on Russian firms with a foreign investor during the 2000-2009 period and linked regional statistics in the conditional logit model. The main findings are threefold. First, we conclude that one theory alone is not able to explain the geographical pattern of foreign investments in Russia. A combination of determinants is at work; market-related factors and the availability of natural resources are important factors in attracting FDI. The relative importance of natural resources seems to grow over time, despite shocks associated with events such as the Yukos trial. Second, existing agglomeration economies encourage foreign investors by means of forces generated simultaneously by sector-specific and inter-sectoral externalities. Third, the findings imply that service-oriented FDI co-locates with extraction industries in resource-endowed regions. The results are robust when Moscow is excluded and for subsamples including only Greenfield investments or both Greenfield investments and mergers and acquisitions (M&A).Keywords: multinational enterprises, regional economic activity, exhaustible re-sources and economic development JEL Classification: F23, R11, Q34  This Working Paper is an output of the joint research project implemented by the National Research University Higher School of Economics (Moscow) and Halle Institute for Economic Research (IWH). We thank the German Research Foundation (DFG) and the Basic research program at HSE for financial support. We also thank Victoria Golikova, Boris Kuznetsov, Andrey Yakovlev, Jutta Günther, Andrea Gauselman, Björn Jindra, Walter Hyll, Gunnar Pippl and the participants of the EACES conference in Glasgow for helpful comments and suggestions. We are grateful to Olga Uvarova for helping us with the Ruslana data set and regional statistics.