How Different is Eastern Europe?

The paper examines the determinants of location choices of French multinational firms in eastern and western Europe. The sample includes 1,843 location choices in 19 countries over the years 1980-1999. The results suggest there might be important differences between the two regions of Europe concerning these determinants. Noticeably, agglomeration effects are less strong in central and eastern European countries than in European Union countries. Location decisions are significantly and positively influenced by the institutional quality of the host country. The paper also investigates whether investors consider western Europe and eastern Europe as two distinct groups of potential host countries. It confirms the relevance of an east-west structure in the country location decision and also show that the relevance of this structure decreases as the transition process advances.