Firm heterogeneity in modelling foreign direct investment location decisions

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.     

Nonconvergent Electoral Equilibria under Scoring Rules: Beyond Plurality

We use Hotelling's spatial model of competition to investigate the position‐taking behavior of political candidates under a class of electoral systems known as scoring rules, though the model also has a natural interpretation in the firm location context. Candidates choose ideological positions so as to maximize their support in society. Convergent Nash equilibria in which all candidates adopt the same policy were characterized by Cox (1987). Here, we investigate nonconvergent equilibria, where candidates adopt divergent policies. We identify a number of classes of scoring rules exhibiting a range of different equilibrium properties. For some of these, nonconvergent equilibria do not exist. For others, nonconvergent equilibria in which candidates cluster at positions spread across the issue space are observed. In particular, we prove that the class of convex rules does not have Nash equilibria (convergent or nonconvergent) with the exception of some derivatives of Borda rule. We also look at “two‐party” equilibria. Implications for the firm location model are discussed.     

An Asymmetric Information Model of Lockouts

This note proposes an asymmetric information model of collective bargaining where the firm has the bargaining power and the union the private information. Results show that the firm may use lockouts to induce the union to reveal its private information.     

LOCATION OF PUBLIC FIRM IN THE PRESENCE OF MULTINATIONAL FIRM: A MIXED DUOPOLY APPROACH*

By incorporating a multinational private firm into the mixed duopoly model with Hotelling‐type spatial competition, we show that the private firm's nationality is a matter of the public firm's location. As the share of foreign capital increases in the private (multinational) firm, the public firm moves to a central place. The effects of price regulation and sequential location choice are also discussed.     

企业异质性对制造业新建企业区位选择的影响

本文运用2005-2013年长三角制造业新建企业微观数据,结合离散选择模型,探究企业异质性对区位选择的影响,并分析了不同特征制造业企业的空间分布.研究从企业异质性的角度合理解释了中国新建制造业企业区位选择的影响机制.结果表明:不同特征的企业之间,区位因素的作用存在差异,企业异质性对区位选择的影响是多样的.随着企业员工数量的增加,新建制造业企业倾向于选择中等水平的城市,在竞争激烈的发达城市选址的可能性降低;国有所有制对企业的区位选择没有显著影响,而外商投资企业则倾向于选择较发达和外资制造业企业相对集中的城市;与外商投资企业相似,高技术企业也具有明显的集聚特征.     

The Impact of Financial Participation and Employee Involvement on Financial Performance: a Re-estimation Using the 1998 Wers

This note re-iterates McNabb and Whitfield's (1998) empirical investigation of the relationship between workplace performance and various indicators of employee involvement. McNabb and Whitfield used the 1990 WIRS, whereas our re-estimation is for the 1998 WERS. Our results differ sharply from theirs; in particular, we discern no significant association between downward communication and firm performance, nor do we find that employee share ownership and profit related pay are substitutes. More generally, our findings underscore the difficulty of specifying the relationship between firm performance and employee involvement that is amply reflected in the diversity of findings in the wider literature.     

Comment on “A note on the Hotelling principle of minimum differentiation: Imitation and crowd”

We argue that the minimum differentiation firm location equilibrium and the pure strategy pricing equilibrium in Di Cintio’s [Di Cintio, M., 2007. A note on the Hotelling principle of minimum differentiation: Imitation and crowd. Research in Economics 61 (3), 122–129] “Note” need not exist under the conditions claimed.     

A GENERALIZED GIBRAT'S LAW*

Many economic and non‐economic variables such as income, wealth, firm size, or city size often distribute Pareto in the upper tail. It is well established that Gibrat's law can explain this phenomenon, but Gibrat's law often does not hold. This note characterizes a class of processes, one that includes Gibrat's law as a special case, that can explain Pareto distributions. Of particular importance is a parsimonious generalization of Gibrat's law that allows size to affect the variance of the growth process but not its mean. This note also shows that under plausible conditions Zipf's law is equivalent to Gibrat's law.     

STAY OR LEAVE? CHOICE OF PLANT LOCATION WITH COST HETEROGENEITY

Using a two-country model, we examine location choices by two domestic firms when they serve only the domestic market and their cost structures differ. The findings indicate that whether the firm that has a greater incentive for foreign direct investment is more or less efficient depends on the differences in domestic and foreign marginal costs, trade costs, and the presence of fixed costs. Plant locations may not be uniquely determined. In particular, a small change in trade costs may reverse plant location. Moreover, a decrease in transport costs in the presence of foreign direct investment may deteriorate domestic welfare.     

Corporate tax and location choice for multinational firms

This article examines the effects of corporate tax on these location decisions of newly established multinational subsidiaries across 26 European countries over an 8-year period. We contribute to the existing literature by examining the effects of a non-linear response of firm location decisions to changes in the tax rate. We also show that there are large variations in the sensitivity to tax rates across sectors and firm size groups. In particular, financial sector firms are more than twice as sensitive to changes in corporation tax rates relative to other sectors. Our baseline result is a finding that a 1% increase in the statutory or policy rate of corporation tax would lead to a reduction in the conditional location probability of 0.68%. Using the effective average tax rate, the marginal effect implies a reduction in the location probability of 1.15% following a 1% increase in the tax rate. Although overall tax has the expected negative effect on location probability, the marginal effect of an increase is lower at higher rates of tax.     

欧美跨国公司在华离岸研发的空间区位战略比较研究*——基于城市层面集群网络的视角

本文基于研发子公司空间分布的城市集群网络特征,构建了跨国公司离岸研发“集群寻求型”战略框架,并采用离散选择模型对这一理论视角进行实证检验。样本包含了1992-2012年期间在华275家美国研发子公司和207家欧洲研发子公司跨越27个城市的区位战略。实证结果揭示了欧美在华离岸研发的差异化空间区位战略：美国公司采用“知识集群寻求型”战略,即一个城市的知识资源和技术基础设施是重要的区位因素;欧洲公司则采用“工业集群寻求型”战略,例如,一个城市的制造业基础、产业专业化以及公司内部的前向关联显著地影响其区位选择。此外,母国公司规模和欧洲公司母国的异质性的影响也得到证实。     

PURPOSELY INDUCED ASYMMETRTC INFORMATION

The theory of optimal employment contracts under asymmetric information generally assumes that the firm is unable to convince workers about the truth of its reports about the state of the world. However evidence indicates that firms are actually unwilling to reveal information for reasons connected with collective bargaining. The present note sets out a bargaining model which rationalizes this attitude and shows that it may cause employment to diverge from its optimal level.     

The efficiency of SMEs in Thai manufacturing: A stochastic frontier analysis

This study examines the technical efficiency of Thai manufacturing SMEs and their firm-specific determinants utilising firm-level industrial census data for 1997 and 2007. Results from a stochastic frontier production function and technical inefficiency effects model reveal that Thai SMEs are overwhelmingly labour intensive with low average technical efficiency in both years. Results also indicate that firm size, firm age, skilled labour, location, type of firm ownership, government assistance, foreign investment and export activity are important firm-specific factors contributing to the technical efficiency of SMEs. Specific policies are warranted to improve Thai SMEs. These policy measures include: easier access to financial services, access to skilled labour, training of the workforce and entrepreneurs, addressing location and regional capacity inequities, encouraging foreign investment for operational synergies and export incentives for penetration in the world market.     

THE ALLOCATION OF OECD DIRECT INVESTMENT BETWEEN CEECS: A DISCRETE CHOICE APPROACH

The choice of the location of foreign direct investment is a complex phenomenon, depending not only on host‐country characteristics, but also on host‐industry and specific source‐firm characteristics. To capture these different influences for foreign investment location decisions into 13 Central and Eastern European Countries (CEECs) over a twelve‐year period, this paper uses a Generalized Nested Logit (GNL) model with firm, industry, and country data. The novel empirical results show that the responsiveness of firms’ decisions regarding where to locate capital in CEECs to country‐level variables differs both across sectors and across firms of different sizes and profitability.     

Equilibrium locations in a mixed duopoly with sequential entry in real time

We investigate a mixed duopoly model where a public firm and a private firm enter a market sequentially over an infinite time horizon, with and without uncertainty over the follower's entry date. We assume that there is a unit-length linear city and show that, if the public firm moves first, equilibrium location falls inside the second and third quartiles. The later the follower is expected to enter, the closer the two firms are. However, if the private firm acts first, it moves aggressively to locate at the middle point (one-half), forcing the public firm to locate nearer the periphery (one-sixth), to minimize consumers' transportation cost. In addition, social welfare is strictly greater when the public firm moves as the leader.     

A note on optimal capital stock and financing constraints

There is a robust literature on the relationship between financing constraints and real investment. Little has been said on the relationship between financing constraints and capital stock in the long run. This note focuses on this last issue. To keep the model tractable, we assume that the firm employs a single input, and this input is used as collateral. We get three main results. Firstly, we show that the optimal capital stock chosen by a firm is affected by financing constraints even when they are slack at the current time. Secondly, we show that the net present value of the potentially constrained firm is always smaller than the one of the never constrained firm. Finally, we find that in the presence of latent financing constraints the firm does not limit itself to reducing its investment when the upper limit is reached. What it actually does is to lower its long run optimal capital stock, amplifying the effects of constraints in the long run.     

The effects of regional tax and subsidy coordination on foreign direct investment

This paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional coordination can lead to two types of welfare gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union's benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.     

On Weitzman's ‘recession resistant’ employee compensation arrangements

This note presents a slight modification of the alternative pay systems discussed by Weitzman (1983). The modification preserves the recession resistance property, yet guarantees that the workers already in the firm, will not become worse off by the conversion to the new pay system even when no other firm converts to it.     

An evaluation of incentive regulation: Corrections

This note re-estimates our model of the determinants and impacts of cost component incentive regulation using an improved data set which avoids double-counting firm observations. It also tests alternative specifications of the relationships. While cost component incentive regulation improves engineering efficiency (heat rates), it does not improve economic efficiency. Thus, our earlier findings are not altered by the smaller data set or by model respecification.     

EXTERNAL ECONOMIES OF SCALE AND OPTIMAL PLANT LOCATION: CORRECTION

This note shows that there is no interior solution in Mai and Hwang's oligopolistic location model with free entry when the sum of external economies scale and the degree of returns‐to‐scale is one or less than one. Furthermore, the shape of the demand function plays a key role in the determination of the oligopolistic firm's plant location.