This paper investigates the location of foreign direct investment (FDI) in Italy over the period 1998-1999. FDIs are measured through the frequencies of acquisitions and greenfield investments per province and sector, so count data models are applied. The results show that the location determinants strongly differ according to the foreign entry mode. Unlike the results of many other studies, foreign ventures do not emulate their domestic counterparts. When foreign firms decide to make a greenfield investment in Italy, they are strongly influenced by location decisions of previous foreign investors, but they must also take into account congestion costs mainly linked to the lack of available labor force in the big northern cities. Thus, Southern provinces (with high unemployment rates) have a high potential attractiveness, which might be implemented with a strong investment in public infrastructures, as demonstrated by simulations. Foreign acquisitions are affected not only by supply of acquisition candidates, but also by the other location characteristics, such as the demand level, public infrastructure, stock of foreign firms and unit labor costs. © 2002 Elsevier B.V. All rights reserved.

Acquisition versus greenfield investment: The location of foreign manufacturers in Italy

Roberto, Basile
2004-01-01

Abstract

This paper investigates the location of foreign direct investment (FDI) in Italy over the period 1998-1999. FDIs are measured through the frequencies of acquisitions and greenfield investments per province and sector, so count data models are applied. The results show that the location determinants strongly differ according to the foreign entry mode. Unlike the results of many other studies, foreign ventures do not emulate their domestic counterparts. When foreign firms decide to make a greenfield investment in Italy, they are strongly influenced by location decisions of previous foreign investors, but they must also take into account congestion costs mainly linked to the lack of available labor force in the big northern cities. Thus, Southern provinces (with high unemployment rates) have a high potential attractiveness, which might be implemented with a strong investment in public infrastructures, as demonstrated by simulations. Foreign acquisitions are affected not only by supply of acquisition candidates, but also by the other location characteristics, such as the demand level, public infrastructure, stock of foreign firms and unit labor costs. © 2002 Elsevier B.V. All rights reserved.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11697/124274
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