What determines the location choice of multinational firms in the information and communication technologies sector?

We analyse the location decisions of 7931 foreign affiliates in the information and communication technologies (ICT) sector established in the European Union (EU) over the period 1998–2008. Our results suggest that, on average, the location probability of foreign-owned firms in ICT industries increased with market size, market potential, the presence of other foreign-owned firms in the ICT sector, human capital, income tax, and the size of the services sector in the neighbouring regions. Labour costs and human capital in neighbouring regions decreased the location probability. Further, our estimates suggest that multinationals based in the EU and the USA were attracted by market size and agglomeration economies from other foreign-owned firms in the ICT sector. However, they responded differently with respect to other location determinants such as income tax rates, human capital and innovation intensity.