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The Motives for FDI Location in Europe and EU Enlargement

Lookup NU author(s): Dr Jonathan Jones, Ilona Serwicka, Professor Colin Wren

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).


Abstract

European Union (EU) enlargement of the mid-2000s is likely to have changed the motives for foreign direct investment (FDI) location between the existing Member States (the EU15) and the new entrants of Central and Eastern Europe (CEECs), but it is poorly understood. This paper uses the framework of Dunning’s eclectic paradigm and data for 35,105 foreign investments in Europe to not only examine if the motives differ between these, but how they are affected by the enlargement. Three asset-exploiting motives of market, resource and efficiency seeking are explored using a conditional logit model for the location choice. This is separately for greenfield and brownfield FDI involving new facilities or jobs, where the latter is efficiency seeking from an expansion or a co-location of functions. The paper finds greenfield FDI in the CEECs seeks an export-platform for the EU market and a low-skilled workforce, but a national market and higher skills are important for the EU15. Brownfield FDI differs from this for expansions only, for which the EU market is important, reflecting scale economies. Surprisingly, EU enlargement has a much stronger effect on FDI location in the EU15 by increasing the importance of the European market. This is possibly because the liberalization of the CEECs was protracted and ongoing throughout the accession process. The paper finds evidence that the differences in the motives between the CEECs and EU15 are narrowing over time, but it argues they are likely to persist.


Publication metadata

Author(s): Jones J, Serwicka I, Wren C

Publication type: Article

Publication status: Published

Journal: Environment and Planning A: Economy and Space

Year: 2020

Volume: 52

Issue: 8

Pages: 1681-1699

Print publication date: 01/11/2020

Online publication date: 07/04/2020

Acceptance date: 07/03/2020

Date deposited: 18/03/2020

ISSN (print): 0308-518X

ISSN (electronic): 1472-3409

Publisher: Sage Publications Ltd

URL: https://doi.org/10.1177/0308518X20916503

DOI: 10.1177/0308518X20916503


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