How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe

In this paper, we investigate the determinants of location choices of French multinational firms in Eastern and Western Europe. Our sample includes 1843 location choices in 19 countries from 1980 to 1999. We find important differences between the two regions of Europe regarding these determinants. Agglomeration effects are less strong in Central and Eastern European countries (CEECs) than in European Union (EU) countries. Location decisions are influenced significantly and positively by the institutional quality of the host country. We also investigate whether investors consider Western Europe and Eastern Europe as two distinct groups of potential host countries. We confirm the relevance of an East-West structure in the country location decision and show that this relevance decreases as the transition process advances, in CEE countries. (C) 2004 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.