Foreign direct investment in the United States: The effects of multinational firm characteristics and local factors on the location decision

Much research has been generally done on the U.S. multinational corporation (MNC) and its foreign direct investment (FDI). Recently, the focus has shifted to foreign MNCs and their investments in the U.S. As the significance and magnitude of FDI have increased in the 80s, researchers have primarily dealt with the motivational and economic impact of FDI in the U.S. Fewer concerns have been placed on the intra-country locational aspects of such FDI. Though extensive research has been done on location decisions of domestic firms, much less is known about location decisions of foreign firms. Previous work that has looked into the location considerations of FDI in this country has primarily focused on secondary data concerning particular industries or regions of FDI, or on a limited set of variables. There is a need for more updated primary research. Although nationality has been considered, the impact of other firm-related characteristics and other factors in location decisions has been overlooked. This dissertation looks into the factors affecting the location decision of manufacturing FDI in the U.S. The objectives of this study are fourfold: (1) to identify the significant location-specific and firm-specific factors and their relative importance to location decisions; (2) to compare location decisions of US and foreign firms, and in particular US, Japanese and West German firms; (3) to investigate the location decision process including the important information sources used and the influence of incentives; (4) to explore the relationship between nationality, location factors and the level of satisfaction. Moreover, this dissertation seeks to provide a more focused and rigorous methodological approach by dealing with the effects of firm-specific factors other than nationality, and by addressing issues previously neglected. Through extensive primary data consisting of three different surveys covering both firms (foreign and domestic) and development agencies, hypotheses are tested, conclusions drawn, and implications for manufacturing MNCs and government development agencies are derived.The results of the study provide an updated view into manufacturing FDI in the U.S. and indicate that differences exist between U.S. and foreign firms in terms of location considerations. However, as other firm-specific factors are considered and important issues addressed through a conjoint analysis, differences across nationalities are less pronounced. Extensive similarities indicate that foreign firms are increasingly behaving like their American counterparts. In addition, the research provides evidence that the relative importance of location factors to particular investors in this country may have changed in recent years. Nevertheless, significant differences still remain among American, Japanese and German manufacturers in the United States.U of I OnlyETDs are only available to UIUC Users without author permissio