The location choice of foreign direct investments: Empirical evidence and methodological challenges

Nielsen, Bo Bernhard; Asmussen, Christian Geisler; Weatherall, Cecilie Dohlmann

doi:10.1016/j.jwb.2016.10.006

Cited by 300 publications

(332 citation statements)

References 223 publications

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“…A complementary classification, introduced by Duranton and Puga (2004), recognises three different sources of externalities: "sharing" includes advantages from sharing indivisible goods and facilities, suppliers, customers and risks; "matching", a source of agglomerations may be the improved matching of labour or firms, an increasing number of agents trying to match is able to improve the quality of each match; "learning" advantages are related to the generation, diffusion and accumulation of knowledge. Studies on FDIs location decisions generally find strongly positive effects of agglomeration economies (Nielsen et al 2017). However, when firm are heterogeneous, they may have different preferences in terms of "co-agglomeration" strategies, presenting an adverse selection.…”

Section: Location Of International Randdmentioning

confidence: 99%

“…Most studies of foreign investment location decisions emphasize the "basic" characteristics of destination location as drivers attracting FDIs. These factors may be demand and market size, productivity and wage levels, corporate tax rates, developed formal institution, but also physical infrastructures and advanced human capital, in terms of education and skills (Nielsen et al 2017).…”

Section: Location Of International Randdmentioning

confidence: 99%

“…The literature on firm's location choice has mainly estimated Conditional Logit (CLM) and Nested Logit (NLM) models (Arauzo-Carod et al 2010;Nielsen et al 2017).…”

Section: Location Choice Modelsmentioning

confidence: 99%

See 2 more Smart Citations

Location of R&D Abroad—An Analysis on Global Cities

Castellani

Lavoratori

2018

Relocation of Economic Activity

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This paper investigates the determinants of the location of MNEs' overseas R&D activities, by focusing on two major drivers. On the one hand, external location factors lead the firm to separate its activities along the value chain and geographically disperse these activities in different locations. On the other hand, the R&D location choice may be driven by the existence of internal (within-firm) linkages that motivate firms to locate their value chain activities in the same location (co-location within-firm). Using data from the fDi Markets database, the study examines 2,580 location decisions of new R&D greenfield investments made by MNEs in 110 global cities worldwide, over the period 2003-2014. Results from Conditional and Mixed Logit econometric models reveal that both external and internal factors matter. Findings confirm the strong role of external agglomeration economies, but also suggest that previous R&D and production activities of the same MNE increase the probability to locate R&D in a given global city.Keywords location of international R&D, empirical methodology JEL Classifications F23, O30, R30 Contacts

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Section: Location Of International Randdmentioning

confidence: 99%

Section: Location Of International Randdmentioning

confidence: 99%

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Location of R&D Abroad—An Analysis on Global Cities

Castellani

Lavoratori

2018

Relocation of Economic Activity

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show abstract

“…Given that FDI decisions are influenced by family ownership and control (Bhaumik, Driffield, & Pal, ; Filatotchev, Strange, Piesse, & Lien, ), we consider it important to introduce the effect of family involvement. Therefore, we aim to fill the gap identified in the literature on the importance of interactions between internal firm characteristics and external factors in location choice (Nielsen, Asmussen, & Weatherall, ) and respond to studies calling for a more thorough examination of location choice, including aspects such as governance structure (Jain et al, ). Additionally, our conclusions lead us to align with other studies that consider that the value of location depends on firm capabilities (Kim & Aguilera, ; Zaheer & Nachum, ).…”

Section: Introductionmentioning

confidence: 99%

The asymmetric effect of institutional distance on international location: Family versus nonfamily firms

Hernández

Nieto

Boellis

2018

Global Strategy Journal

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Research Summary: This study examines international location choice by considering the potential effects of institutional distance on the decision comparing family and nonfamily firms. We argue that the magnitude and direction of institutional distance matter and that institutional distance has an asymmetric effect on location choice. However, we argue that family involvement has a moderating effect on this relationship because family firms manage institutional distance differently than nonfamily counterparts. Our results, using a sample of Italian firms (2000–2013), reveal that firms are more likely to choose locations for which the positive institutional distance is greater. Additionally, when compared to nonfamily firms, family firms are more likely to choose locations with greater negative institutional distance and less likely to enter countries with greater positive institutional distance. Managerial Summary: Institutional distance between countries is an important dimension firms take into account when deciding the location of their foreign investments. We show the importance of the magnitude and direction of this distance in choosing the destination country and the different impact that distance has for family firms. Institutional distance has an asymmetric effect on the international location choice. Specifically, greater positive institutional distance makes firms more likely to choose a location; on the contrary, greater negative institutional distance makes the location less attractive. Family firms, however, present some peculiarities that fine‐tune the effect of institutional distance on the location decision. Thus, family firms are more (less) likely to choose locations involving lower (higher) levels of institutional development than their home country compared to nonfamily counterparts.

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“…FDI location choice strategy is one of the most significant topics underlying the pattern of internationalisation by EMNEs [9] [10]. Based on the institutional theory, considerable research attention has paid to how EMNEs made their locational decisions in responding to external institutional constrains in order to gain legitimacy in a foreign country [11] [12] [13] [14].…”

Section: Introductionmentioning

confidence: 99%

The Effects of Institutional Difference and Resource Seeking Intent on Location Choice of Chinese Outward FDI

Kang¹,

Li²

2018

TEL

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This study seeks to explain how differences in political risk and economic freedom between host and home countries interact with investing firms' resource-seeking intent to influence the firms' outward foreign direct investment (FDI) location choice. Using panel data covering Chinese outward FDI in 62 host countries during the period of 2003-2014, we performed panel data regression analysis. The results show that when firms' resource seeking intention is high, the FDI location choice is negatively associated with the differences in political risk, but positively associated with the differences in economic freedom between China and the host countries. The results also show that there is a substituting effect between political risk and economic freedom in their interactions with resource-seeking intent to influence FDI location choice. The findings suggest that the Chinese firms' outward FDI location choice is a result of the interplay and the fit between the firms' external legitimacy in the host countries and the firms' internal legitimacy within the multinational organization.

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The location choice of foreign direct investments: Empirical evidence and methodological challenges

Cited by 300 publications

References 223 publications

Location of R&D Abroad—An Analysis on Global Cities

Location of R&D Abroad—An Analysis on Global Cities

The asymmetric effect of institutional distance on international location: Family versus nonfamily firms

The Effects of Institutional Difference and Resource Seeking Intent on Location Choice of Chinese Outward FDI

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