their Geographical Neighbourhood

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Editorial Board Dr Joan Costa-i-Font Dr Vassilis Monastiriotis Dr Sara Hagemann Dr Katjana Gattermann Ms Sonja Avlijas All views expressed in this paper are those of the author(s) and do not necessarily represent the views of the editors or the LSE. © Andrea Ascani, Riccardo Crescenzi & Simona Iammarino
Economic Institutions and the Location Strategies of European Multinationals in their Geographical Neighbourhood Andrea Ascani*, Riccardo Crescenzi** & Simona Iammarino*** Abstract This paper investigates how the location behaviour of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighbourhood Policy (ENP) countries and the Russian Federation. The paper aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labour market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the randomcoefficient Mixed Logit analysis here applied shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions. Keywords: JEL Code: Multinational Enterprises, Economic Institutions, Location Choice, European Union F23, P33, L20, R30 * Department of Geography and Environment, London School of Economics and Political Science Email: a.ascani@lse.ac.uk ** Department of Geography and Environment, London School of Economics and Political Science Email: r.crescenzi@lse.ac.uk *** Department of Geography and Environment, London School of Economics and Political Science Email: s.iammarino@lse.ac.uk
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