Economic Institutions and the Location Strategies of European Multinationals in Their Geographical Neighbourhood

58 Pages Posted: 31 Jul 2015

See all articles by Andrea Ascani

Andrea Ascani

London School of Economics & Political Science (LSE) - Department of Geography and Environment; Utrecht University - Department of Economic Geography

Riccardo Crescenzi

London School of Economics & Political Science (LSE) - Department of Geography and Environment

Simona Iammarino

London School of Economics & Political Science (LSE) - Department of Geography and Environment

Date Written: July 29, 2015

Abstract

This paper investigates how the location behaviour of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighbourhood Policy (ENP) countries and the Russian Federation. The paper aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labour market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the random-coefficient Mixed Logit analysis here applied shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.

Keywords: Multinational Enterprises, Economic Institutions, Location Choice, European Union

JEL Classification: F23, P33, L20, R30

Suggested Citation

Ascani, Andrea and Ascani, Andrea and Crescenzi, Riccardo and Iammarino, Simona, Economic Institutions and the Location Strategies of European Multinationals in Their Geographical Neighbourhood (July 29, 2015). LEQS Paper No. 97, Available at SSRN: https://ssrn.com/abstract=2637486 or http://dx.doi.org/10.2139/ssrn.2637486

Andrea Ascani (Contact Author)

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Utrecht University - Department of Economic Geography ( email )

Heidelberglaan 2
Utrecht
Netherlands

Riccardo Crescenzi

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Simona Iammarino

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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