New empirical findings for international investment in intangible assets

This study empirically analyses the determinants of greenfield investment in intangible assets in emerging and industrialized countries. Data consists of host parent country pairs of greenfield FDI projects in (i) software (except video games), (ii) advertising, public relations and related activities, (iii) headquarters, (iv) research & development and (v) design, development & testing. With a world market share of 33 per cent in 2011 in terms of the number of projects, descriptive statistics show that the EU 27 is one of the most important locations for international greenfield investment in intangible assets. However, there was a decline in the EU 27s share of such projects after the recent financial and economic crisis, which is mainly due to the decrease in intra-EU greenfield FDI activities. In contrast, FDI inflows in intangible assets increased in the United States, in other non EU OECD countries and in emerging countries. Among the EU countries of Ireland, Luxembourg, the United Kingdom, Denmark, Belgium, Netherlands and Sweden are the most attractive locations for Non-EU investors, whereas the southern and East EU countries are least successful in attracting FDI projects in intangible assets. The results using fixed and random effects negative binomial regression models for 40 host and 26 parent countries during the period 2003-2010 show that FDI in intangible assets depends significantly positively on quantity of human capital, quality of human capital measured as the PISA score in maths and reading, costs of starting a business, broadband penetration, strength of investor protection, R&D endowment and direct R&D subsidies. Wage costs (or unit labour costs) have a significant negative impact on FDI inflows in intangible assets. Other policy factors, such as labour market regulations, product, or FDI regulations, do not have a significant impact. Separate estimates for the EU-27 countries show that corporate taxes matter for the international location decision for intangible assets. The empirical results presented may help to develop a proactive action plan to attract international investments in intangible assets in Europe.