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Firm heterogeneity in modelling foreign direct investment location decisions

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This article investigates the probability of the FDI location decisions of multinational enterprises using a mixed logit panel data model, which is the most flexible discrete choice model. We employ a three-level data set, which includes over 1100 FDI location decisions into 13 alternative Central and Eastern European Countries (CEECs) over an 11-year period. Our empirical results on the effect of host country, industry and firm characteristics on the probability of undertaking FDI in a particular location are significant and consistent with the predictions of our theoretical model.

Keywords: C25; F23; Halton draws; firm heterogeneity; foreign direct investment; mixed logit model; multi-level data; random parameters

Document Type: Research Article


Affiliations: Division of Economics, School of Business and Economics, Loughborough University, Loughborough, LE11 3TU, UK

Publication date: 2014-04-23

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