Local industrial systems and the location of FDI in Italy

Abstract

This article investigates the determinants of foreign direct investment (FDI)location across Italian provinces. Specifically it examines the relationship between industry- specific local industrial systems and the location of inward FDI. This extends previous analysis beyond the mere density of activity, to illustrate the importance of the specific nature of agglomerations in attracting inward investment. The article develops a model of FDI location choice using a unique FDI database stratified by industry and province. The results also suggest that the importance of agglomeration differs between industries, and offers some explanation for this