Market Potential, Productivity and Foreign Direct Investment: Some Evidence from Three Case Studies

Abstract

This paper aims at analysing the importance of local determinants to foreign direct investment (FDI) in three European regional case studies. The originality of the approach lies in the use of disaggregated data by sector and by region. The results are threefold. First, regional demand and productivity are fundamental FDI determinants, confirming most studies with national data. Second, regional FDI inflows are more dependent on regional than national determinants. Finally, the effect of market potential measured with absolute GDP on regional FDI diminishes linearly with distance and does not when measured with GDP per capita.

The evolution of strategic asset-seeking acquisitions by emerging market multinationals

“…the quotient between total labor costs and real output) of the host countries. A low value of this variable is associated to a higher productivity (Artige and Nicolini, 2010) and, hence, to a higher efficiency.…”

A holistic approach of the labour productivity slowdown in the regions of the European Union

“…The spatial unit in the analysis is NUTS 2 regions. Spatial disaggregation is useful for detecting productivity slowdown; studies have proved that regional characteristics matter even more than national ones (Artige & Nicolini, 2006).…”

“…The surge of aggregate demand, benefiting the construction sector and domestic services and leading to a boom‐bust cycle in low‐skilled employment, might be the basis of unsustainable growth (EIB, 2011). The transformations and peculiar characteristics of sectors that have an asymmetrical sectoral weight that their kind and degree of specialization reflect impact the productivity growth of regions differently (Artige & Nicolini, 2006). The inefficient reallocation of management resources and the inability of firms to sufficiently adapt to the change in demand structure or to guard against skill obsolescence might be another reason for productivity slowdown (Nakamura et al, 2019).…”

The Market size and Foreign Direct Investment Relationship: A Panel Data Analysis of the OECD (The Founders and the Rest)

“…In three European locations, Artige and Nicolini (2009) have investigated the potential factors of FDI attraction. In the first section, they present an overview of FDI trends by sector and location, as well as a number of probable determinants.…”