The Characteristics of FDI Activities Located in Different Host Regions — A Study Based on Firm-Level Data

Abstract

Based on a unique firm-level dataset for Swiss MNEs, this paper characterizes FDI activities located in different host regions. The characterization of the FDI activities is based on information on the parent companies, their foreign subsidiaries and the two-way trade flows between parent companies and foreign affiliates Concretely, the study provides econometric evidence based on multivariate probit estimates about the relationship between a firm’s choice of nine alternative host regions and the type of FDI (horizontal production-oriented, vertical production-oriented, distribution-oriented), a firm’s FDI experience and its capabilities for innovation, respectively. The estimation results indicate that there is low correlation between a firm’s capability for innovation and FDI experience, respectively, and the location of their FDI activities. Further, our estimates indicate large heterogeneity with respect to the type of FDI activities.