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Review of World Economics

, Volume 139, Issue 4, pp 583–600 | Cite as

Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation

  • Frank Barry
  • Holger Görg
  • Eric Strobl
Articles

Abstract

Previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. The authors distinguish between “efficiency agglomerations” which arise as firms increase their efficiency by locating close to each other, and “demonstration effects” whereby existing firms send signals to new investors as to the reliability and attractiveness of the host country. They try to disentangle these two effects by examining the location of US firms in Ireland. They find that both sources of agglomerations have been important determinants of US firm entry into Ireland. JEL no. F23

Keywords

Foreign direct investment agglomerations demonstration effects 

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Copyright information

© Kiel Institute for World Economics 2003

Authors and Affiliations

  1. 1.University College DublinIreland
  2. 2.University of Nottingham and DIW BerlinGermany
  3. 3.Catholic University of LeuvenBelgium

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