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

Author

Listed:
  • Roberto Basile

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper investigates the location of foreign direct investment (FDI) in Italy over the period 1986-1999. FDI 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.

Suggested Citation

  • Roberto Basile, 2002. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," ISAE Working Papers 27, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    • Handle: RePEc:isa:wpaper:27
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    More about this item

    Keywords

    Foreign Direct Investments; Location; Count Data Models;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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