Foreign Direct Investment : The Factors Affecting the Location of Foreign Branch Plants in the United States

Broad trends in the regional dispersion, industrial composition, and source country of foreign investment in manufacturing branch plants over the 1977-1986 period are described. Regression analysis, with states as the unit of observation, is used to investigate the factors important to the location decision of foreign firms. The regression model is desegregated to look at high-tech and non-high-tech manufacturing plants, and by source country of the investment (Japan, Europe and all other countries). The results indicate that nearness to markets is the dominant factor influencing the location of foreign manufacturing branch plants in the United States. Other factors analyzed include labor market conditions, access to transportation facilities, state effort in attracting foreign industry, corporate tax rates, availability of skilled labor, and construction costs