appear for Baden-Württemberg, though a world-class exporter. The location choice across
regions may obey to different objectives of the investors.
d) The level of regional human capital and the regional expenditure in R&D seem to be important
determinants only for Catalunya. Foreign investors seem to have accompanied the increasing
trends observed for the investment in human capital and in R&D in that region. Again, the
catching-up process toward the EU average may explain this positive relationship.
5. Conclusion
In this study we examined the main potential determinants likely to attract FDI in three
European regions. In the first part we provided an overview of the FDI trends by sector and by region
possibly associated with a selection of potential determinants. In particular, we looked at GDP,
productivity and a few innovation indicators. We ran regressions to identify a relationship between
FDI inflows by region an by sector and those determinants.
Our results show that there is not a unique way of interpreting the determinants of FDI inflows
in our regions. We always identify a positive and statistical significant relationship between GDP and
FDI per capita, as it is not the case for the other determinants.
The three regions of our sample, despite relatively similar economic performance and
economic environment, may rely on different determinants to attract FDI. Two observations can be
made. First, the difference in FDI performance across regions cannot be attributed to clear-cut
determinants. As a result, regional wealth is not a sufficient condition to attract large amounts of FDI.
Second, the FDI distribution by sector, different across regions, may be important to analyze FDI
regional performances.
All the sectors are not associated with the same determinants. The difference in FDI
distribution (by sector) across regions may be explained by the differences we observed in the
statistical significance of the determinants across those regions.
In Catalunya, FDI inflows are not concentrated in a single sector. The declining productivity
does not seem to affect (or has not yet) statistically foreign investment inflows, while market size,
openness to trade, R&D effort and human capital are determinants associated with FDI inflows.
Regarding Baden-Württemberg, FDI inflows, with little concentration by sector, seem to be mostly
related to the size of its market and its productivity performance. Finally, our econometric results show
that Lombardia, attracting much less FDI (per capita) than Baden-Württemberg, remains an attractive
FDI destination for specific sectors due to its market size and its productivity performance. It has a
strong specialization in traditional manufacturing and has attracted many foreign investments in that
sector despite strong international competition.
We also observed that R&D and human capital determinants are significant only for Catalunya.
This could be due to the fact that Catalunya stands at a different stage of economic development
compared with mature economies of Baden Württemberg and Lombardia.
The lack of data prevented us from carrying out a more exhaustive econometric analysis. The
first next step would be to extend this study to a larger number of regions and realize a finer analysis
by sector (ideally using NACE classification at two digits) to identify the FDI determinants.
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