Evidence for the Network Structure of Foreign Direct Investment

FDI into a particular host country is likely influenced by FDI into neighboring countries. Bloningen (2007) supports this multilateral view by providing evidence for the influence of spatial interaction on FDI. This paper extends Bloningen’s work by incorporating interactions derived from the existing subsidiary networks of multinational firms. Thus, we account for both spatial interdependencies and path dependencies in FDI location choice. Analyzing a large panel dataset of French multinational firms, our regression results indicate that the FDI location choices of French MNEs are significantly influenced by spatial relationships and their existing network of affiliates. While the results are sensitive to sample selection, this sensitivity offers insights into the affiliate network structure and the motivations behind FDI location choices for these particular samples.