Acquisition Versus Greenfield Investment: The Location of Foreign Manufacturers in Italy

44 Pages Posted: 14 Mar 2002

See all articles by Roberto Basile

Roberto Basile

University of L'Aquila - Faculty of Economics

Date Written: July 2001

Abstract

This paper studies FDI location determinants in Italy. FDI measures are the frequencies of acquisitions and greenfield investments per province and sector, so count data models are applied. The results show that the location determinants strongly differ according to the type of investment considered. Differently from the results of many other studies, foreign ventures do not emulate their Italian counterparts. When foreign firms decide to make a greenfield investment in Italy, generally they are strongly influenced by location decisions of previous foreign investors, but they also must take into account congestion costs mainly linked to the lack of available labor force in the biggest northern cities (i.e. Milan and Turin). As demonstrated by simulations, this also implies that many Southern provinces (which have high unemployment rates) have a very high potential attractiveness, which might be implemented with a strong investment in public infrastructures. Foreign acquisitions are affected not only by supply of acquisition candidates, but also by other location characteristics, such as demand level, public infrastructure, stock of foreign firms and labor costs.

Keywords: Foreign Direct Investments, location, count data models

JEL Classification: F23, R30, C35

Suggested Citation

Basile, Roberto, Acquisition Versus Greenfield Investment: The Location of Foreign Manufacturers in Italy (July 2001). Available at SSRN: https://ssrn.com/abstract=303519

Roberto Basile (Contact Author)

University of L'Aquila - Faculty of Economics ( email )

Roio Poggio, 67040
Italy

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