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Regional Upgrading in Southern Europe pp 129–149Cite as

Patterns of Foreign Direct Investment in Southern European Periphery

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Part of the book series: Advances in Spatial Science ((ADVSPATIAL))

Abstract

This paper examines patterns of Foreign Direct Investment (FDI) inflows to Southern European (SE) regions, which seem to be at the margin of the FDI attraction game accounting for a very small share of total inward FDI in the EU. In order to understand why these regions have attracted such a low number of foreign investors, this contribution provides the following analysis: (i) an overall picture of the main characteristics of patterns of inward FDI in SE regions at geographical and sectoral levels; (ii) the factors that drive FDI flows into EU regions; (iii) an assessment of the potential attractiveness of SE regions, both in absolute terms and with respect to other EU regions. The main results indicate that SE regions are definitively less attractive than other EU regions, though a lot of variation does exist at both geographical and sectoral levels. In order to improve their capacity to attract FDI, SE regions should improve their factors of attractiveness by implementing several structural reforms.

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Notes

  1. 1.

    These figures come from FDIRegio database. See Capello et al. (2011) for a comprehensive description of the database and further information on its reliability in describing patterns of FDI in the EU.

  2. 2.

    Although the evaluation of several consecutive periods of time would have allowed a more in depth and exhaustive study, it should be born in mind that the availability of data is a major constraint in the analysis of factors driving FDI at regional level.

  3. 3.

    Basile et al. (2005), Bronzini (2004), Mariotti and Piscitello (1995) analyzed the distribution of foreign firms across Italian regions, while Mota and Brandao (2001), Barbosa et al. (2004) and Guimarães et al. (2000) focused on patterns of FDI across Portuguese regions. The distribution of FDI across Spanish regions has been investigated by Egea and Lopez (1991), Villaverde and Maza (2012) and Rodrıguez and Pallas (2008), while Jordaan and Monastiriotis (2011) and Petrakou (2013) deals with the attractiveness of Greek regions.

  4. 4.

    Numbers of newly created foreign firms have been normalized by population in order to eliminate the size effect, according to which larger countries are able to attract more firms than smaller ones. In so doing, figures showed in Table 6.1 are directly comparable.

  5. 5.

    The theory of FDI usually distinguishes four types of FDI: (i) horizontal FDI, which occurs when a firm is interested in exploiting foreign markets; (ii) vertical FDI, which occurs when firms fragment different stages of the production process in one or more locations in order to exploit international differences in input prices; (iii) resource seeking FDI which occurs when firms are searching for affordable provision of natural resources; and (iv) strategic asset seeking FDI, which occurs when firms aim to gain access to advanced technologies, skills and other production capabilities in foreign locations. See Barba Navaretti and Venables (2004) and Iammarino and McCann (2013) for a thorough discussion of these and other theoretical issues related to multinational enterprises.

  6. 6.

    SPIs shown in Fig. 6.1, have been computed using the number of foreign firms per million of inhabitants in order to capture the size effect. Then, they have been normalized by the EU average and the corresponding national averages in order to make it easier to compare across regions both within and across countries. This implies that the SPI varies between –1 and +1. It assumes the value of zero when a region hosts the same number of foreign firms per million of inhabitants as the EU or the corresponding national average.

  7. 7.

    Recently, more complex specifications have been developed in order to capture spatial patterns in data generating processes. Both the lag and the error models can be nested within one or more of these specifications. See Elhorst (2010) for a discussion on this.

  8. 8.

    The dependent variable is the number of newly created foreign firms per million of inhabitants established in each EU26 NUTS2 region during the period from 2005 to 2007.

  9. 9.

    As explained in the previous section, spatial patterns of FDI reflect the motivations at the base of the decision to undertake foreign investments. Researchers do not observe these motivations.

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Author information

Authors and Affiliations

  1. Department of Sociology and Social Research, University of Milano-Bicocca, Via Bicocca degli Arcimboldi, 8, 20136, Milano, Italy

    Laura Resmini

  2. CERTeT—Università Commerciale “L. Bocconi”, Via Roentgen, 1, 20136, Milano, Italy

    Laura Resmini

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  1. Laura Resmini
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Correspondence to Laura Resmini .

Editor information

Editors and Affiliations

  1. University of Porto, Lisboa, Portugal

    Madalena Fonseca

  2. Department ABC, Politecnico di Milano, Milano, Italy

    Ugo Fratesi

Statistical Annex

Statistical Annex

Table 6.8 Descriptive statistics
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Table 6.9 Spatial diagnostics: all specifications
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Resmini, L. (2017). Patterns of Foreign Direct Investment in Southern European Periphery. In: Fonseca, M., Fratesi, U. (eds) Regional Upgrading in Southern Europe. Advances in Spatial Science. Springer, Cham. https://doi.org/10.1007/978-3-319-49818-8_6

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