The Annals of Regional Science

, Volume 46, Issue 2, pp 295–312 | Cite as

Agglomeration effects and the location of FDI: evidence from French first-time movers

  • Vivien ProcherEmail author
Original Paper


This paper analyses the location choice determinants of French first-time investments in Europe, North America and North Africa. Firm locations are examined on two geographical scales, the national and regional level. The final sample comprises 307 location choices in 27 countries and across 45 regions. Both, location- and firm-specific variables are used for analyzing investment strategies. The results show that higher market demand and cultural proximity to France increase the likelihood of a particular location to be chosen, whereas higher labour cost and a larger distance between a foreign location and the headquarters deter FDI investments. Manufacturing and older companies are more likely to establish their first subsidiary in Eastern Europe. Furthermore, this study examines the extent to which French investors choose foreign locations that already host a significant number of French firms. The results obtained from regressions with various absolute and relative agglomeration measures suggest that French investors are rather attracted by firm cluster in general, or by the unobserved factors that led to the agglomeration in the first place, than by any nation-specific firm cluster.

JEL Classification

F21 F23 D21 R30 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. AMADEUS database, release 136, 113 and 88. Bureau van Dijk Electronic Publishing.
  2. Barrios S, Görg H, Strobl E (2006) Multinationals’ location choice, agglomeration economies and public incentives. Int Reg Sci Rev 29: 81–107CrossRefGoogle Scholar
  3. Basile R (2004) Acquisition versus greenfield investment: the location of foreign manufacturers in Italy. Reg Sci Urban Econ 34: 3–25CrossRefGoogle Scholar
  4. Békés G (2005) Location of manufacturing FDI in Hungary: How important are inter-company relationships? MNB Working Paper 2005/07Google Scholar
  5. Bellak C, Leibrecht M (2009) Do low corporate income tax rates attract FDI? Evidence from Central- and East European countries. Appl Econ 41(21): 2691–2703CrossRefGoogle Scholar
  6. Bellak C, Leibrecht M, Damijan JP (2009) Infrastructure endowment and corporate income taxes as determinants of Foreign Direct Investment in Central- and Eastern European countries. World Econ 32(2): 267–290CrossRefGoogle Scholar
  7. Cameron AC, Trivedi PK (2005) Microeconomics: methods and applications. Cambridge University Press, New YorkGoogle Scholar
  8. Coughlin C, Terza JV, Arromdee V (1991) State characteristics and the location of Foreign Direct Investment within the Unites States. Rev Econ Stat 73: 675–683CrossRefGoogle Scholar
  9. Crozet M, Mayer T, Mucchielli JL (2004) How do firms agglomerate? A study of FDI in France. Reg Sci Urban Econ 31: 27–54CrossRefGoogle Scholar
  10. Devereux MP, Griffith R (1998) Taxes and the location of production: evidence from a panel of US multinationals. Public Econ 68: 335–367CrossRefGoogle Scholar
  11. Devereux MP, Griffith R, Klemm A (2002) Corporate income tax reforms and international tax competition. Econ Policy 35: 451–495Google Scholar
  12. Devereux MP, Griffith R, Simpson H (2007) Firm location decisions, regional grants and agglomeration externalities. Public Econ 91: 413–435CrossRefGoogle Scholar
  13. Disdier AC, Mayer T (2004) How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe. J Comp Econ 32(2): 280–296CrossRefGoogle Scholar
  14. Ederveen S, de Mooij R (2003) Taxation and foreign direct investment: a synthesis of empirical research. Int Tax Public Financ 10: 673–693CrossRefGoogle Scholar
  15. European Labour Force Survey (2004) Available at
  16. European Tax Survey (2004). European Commission staff working paper, available at
  17. EUROSTAT, Accessed 2 November 2007
  18. Fujita M, Krugman P, Venables A (1999) The spatial economy: cities, regions, and international trade. MIT Press, CambridgeGoogle Scholar
  19. Head K, Mayer T (2004) The empirics of agglomeration and trade. In: Henderson JV, Thisse JF (eds) Handbook of regional and urban economics. Elsevier, Amsterdam, pp 2609–2669Google Scholar
  20. Head K, Ries J, Swenson D (1995) Agglomeration benefits and location choice: evidence from Japanese manufacturing investments in the United States. J Int Econ 38(3–4): 223–247CrossRefGoogle Scholar
  21. Hilber CAL, Voicu I (2009) Agglomeration economies and the location of Foreign Direct Investment: Empirical Evidence from Romania. Reg Stud (forthcoming)Google Scholar
  22. INSEE (Institut National de la Statistique et des Etudes Economique) (2005) Fiches Thématiques: Les immigrés en France, édition 2005Google Scholar
  23. Jianping D (1999) Agglomeration effects in manufacturing location, are there any country’s preferences?. Econ Int 52(1): 59–78Google Scholar
  24. Krugman P (1980) Scale economies, product differentiation, and the pattern of trade. Am Econ Rev 70: 950–959Google Scholar
  25. Krugman P (1991) Increasing returns and economic geography. J Polit Econ 99: 483–499CrossRefGoogle Scholar
  26. Mayer T, Mucchielli JL (1998) Strategic location behaviour: The case of Japanese investments in Europe. In: Mucchielli JL, Buckley PJ, Cordell VV (eds) Globalization and regionalization: strategies, policies and economic environments. The Haworth Press, Binghamton, pp 131–168Google Scholar
  27. Mayer T, Méjean I, Nefussi B (2007) The location of domestic and foreign production affiliates by French multinational firms. CEPII Working Paper No. 7Google Scholar
  28. Mucchielli JL, Puech F (2003) Internationalisation et localization des firmes multinationals: l’exemple des enterprises francaises en Europe. Economie et Statistique, Les entreprises sur les marchés mondiaux 363-363-365:129–144Google Scholar
  29. Navaretti GB, Castellani D, Disdier AC (2006) How does investing in cheap labour countries affect performance at home? France and Italy. CEPR Discussion Paper No. 5765Google Scholar
  30. Pusterla F, Resmini L (2007) Where do foreign firms locate in transition countries? An empirical investigation. Ann Reg Sci 41(4): 835–856CrossRefGoogle Scholar
  31. Rauch JE (1999) Networks versus markets in international trade. J Econ Lit 39(4): 1177–1203CrossRefGoogle Scholar
  32. Roberts MJ, Tybout JR (1997) The decision to export in Colombia: an empirical model of entry with sunk costs. Am Econ Rev 87(4): 545–556Google Scholar
  33. Schürmann C (2001). PKW und LKW Reisezeit zwischen Europäischen NUTS Regionen. Institute für Raumplanung (IRPUD), Technische Universität DortmundGoogle Scholar
  34. Train K (2003) Discrete choice method with simulation. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  35. UNCTAD (2005) Country profile: FranceGoogle Scholar
  36. Zentrum für Europäische Wirtschaftsforschung (ZEW) (2005) Effective tax burden of companies in Europe. Publication/Press releaseGoogle Scholar

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Ruhr Graduate School in Economics (RGS Econ)Rheinisch-Westfälisches Institut für WirtschaftsforschungEssenGermany

Personalised recommendations