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CEP discussion paper
The Spatial Organization of Multinational Firms
Fabrice Defever
December 2010
Paper No' CEPDP1029:
Full Paper (pdf)

JEL Classification: F23; L22; R3

Tags: functional fragmentation; vertical linkages; location choice

Using six years of firm-level data covering 224 regions of the enlarged European Union, we evaluate the importance to a firm of locating its activities (production, headquarters, R&D, logistics and sales) close together. We find that, after controlling for regional characteristics, being closely located to a previous investment positively affects firm location choice. However, the impact of distance is dependent on the type of investment (production or service). While within-firm co-location is important for both service and production activities, only production plants are likely to be located close to prior production investments. In this latter case, national borders have a surprisingly positive effect, increasing the probability of choosing a nearby location, but on the other side of the border.