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INTERNATIONAL RELOCATION OF PRODUCTION: WHERE DO FIRMS GO?
Author(s) -
Sleuwaegen Leo,
Pennings Enrico
Publication year - 2006
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2006.00388.x
Subject(s) - relocation , multinational corporation , business , competition (biology) , production (economics) , investment (military) , sample (material) , industrial organization , foreign direct investment , labour economics , economics , microeconomics , finance , programming language , ecology , chemistry , macroeconomics , chromatography , politics , computer science , political science , law , biology
The flexible relocation of capacity across countries by multinational enterprises has become an important source of concern. Using a unique sample of relocating firms in Belgium, we find that wages and market potential of host regions are important determinants for the location choice. Considering firm characteristics, we show that large firms have a higher propensity to relocate to remote countries. Public aid only plays a decisive role in the investment decision for relocations to adjacent countries, suggesting a potential harmful role in distorting competition. More proactive policies in line with changing comparative location advantages should be implemented to accommodate relocations.