We analyze the spatial organization of multinational firms and the incentives for firms to locate activities close to each other. We show that multinational firms spatially organize service and production activities differently.
Using six years of firm-level data covering 224 regions of the enlarged European Union, we evaluate the importance to a firm of locating its activities (production, headquarters, R&D, logistics and sales) close together. We find that, after controlling for regional characteristics, being closely located to a previous investment positively affects firm location choice. However, the impact of distance is dependent on the type of investment (production or service). While within-firm co-location is important for both service and production activities, only production plants are likely to be located close to prior production investments. In this latter case, national borders have a surprisingly positive effect, increasing the probability of choosing a nearby location, but on the other side of the border.
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Fabrice Defever
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Sir Clive Granger BuildingUniversity of NottinghamUniversity Park Nottingham, NG7 2RD
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