Market potential, productivity and foreign direct investment : some evidence from three case studies

Rosella Nicolini's research is supported by a Ramón y Cajal contract. Financial support from grants 2005SRG00470 and SEJ2005-01427/ECON is acknowledged.This paper aims at analysing the importance of local determinants to foreign direct investment (FDI) in three European regional case studies. The originality of the approach lies in the use of disaggregated data by sector and by region. The results are threefold. First, regional demand and productivity are fundamental FDI determinants, confirming most studies with national data. Second, regional FDI inflows are more dependent on regional than national determinants. Finally, the effect of market potential measured with absolute GDP on regional FDI diminishes linearly with distance and does not when measured with GDP per capita