Agglomeration effects, state policies, and competition in the location of japanese FDI in Europe

The location choices of foreign direct investment within the European Union are increasingly seen as “location tournaments” between countries willing to attract firms. The spatial organization of these multinational firms has become a very sensitive topic. Within this context, we study the location choices of Japanese firms in Europe during the period 1984–1993. Added to the classical location advantages that may determine the choice of an investor, various state policy variables are considered. The attractiveness of countries might also be submitted to agglomeration effects with the clustering of Japanese firms generating self-reinforcing positive externalities. We test, in a conditional logit model, for this effect and for its temporal dimension: do Japanese firms tend to choose the same countries and the same dates of entry? We find evidence of both spatial and temporal agglomeration in the location behavior of Japanese firms in Europe. We also try to determine the influence of competetion intensity on the proximity choices of firms.