Regional and Country Determinants of Locational Decisions : Japanese Multinationals in European Manufacturing

This paper identifies the determinants of the locational pattern of Japanese foreign direct investment in European manufacturing industries in 1993, by using a new data set that covers 450 Japanese subsidiaries distributed across 45 regions and 9 member states in the European Union. The statistical analysis finds, most importantly, that both country and regional factors determine the locational pattern. Corporate tax rates, union’s activity and R&D capability are found to be significant locational factors at the national level, while regional labor costs, unemployment and transport infrastructure are the locational factors at the regional level.