Abstract

Using data on 5,761 foreign subsidiaries established in 55 regions of 8 EU countries over the period 1991-99, this paper examines multinational firms' location choices in Europe. We emphasise the role of EU policies and of firm specific characteristics in shaping location decisions. Our main findings are: i) national boundaries do not seem to affect location decisions, with the relevant exception of Italy; ii) Cohesion Fund and Objective 1 eligibility played a significant role in attracting multinationals, partially counterbalancing agglomeration forces at work; iii) determinants of location choices differ according to MNEs' experience of regions in which they are active, and to the national origins of firms. In particular EU and US based MNEs exhibit a different sensitivity to labour market variables.