MERIT-Infonomics Research Memorandum series Location and agglomeration of FDI in The Netherlands: implications for policy

Understanding the determinants of the location of MNE affiliates has become increasingly important for policy makers at the local, regional, national, and supra-national level, as investment promotion schemes are increasingly seen as an important cornerstone of the industrial development of most countries and regions. We examine some of the factors that explain an MNE’s choice for a particular region within the Netherlands, and investigate whether agglomeration patterns can be detected, and how this establishment pattern relates to domestic firms. We also investigate if there are differences in locational choice prompted by the home country of the foreign investor. The results suggest that the determinants of location vary by home country and the nature of the affiliates, and also differs from the behaviour of domestic firms. We suggest that FDI promotion policies need to be aligned with industrial policy if governments are to benefit from the externalities that derive from MNE affiliates.