Douglas Woodward

Home-field advantage: location decisions of Portuguese entrepreneurs

An investors home bias in industrial location decisions may stem from personal factors, social capital, other non-transferable assets, and imperfect information about the urban and regional environment. This paper explores the distinction between home-base and non-home location decisions in Portugal. We reach two important conclusions. First, the introduction of a variable accounting for prior base of economic activity significantly improves the statistical results. Second, we find that the weighting of distinct location attributes differs between home and non-home locations. Notably, non-home location choices are strongly governed by agglomeration economies and proximity to major urban centers, possibly replicating prior location decisions to economize on search costs. The results also enable us to quantify the investors willingness to opt for a possible home- field advantage; for example, entrepreneurs accept over three times higher labor costs to compete in their resident area of business.  2002 Elsevier Science (USA). All rights reserved.

A Tractable Approach to the Firm Location Decision Problem

The conditional logit model based on random utility maximization has provided an adequate framework to model firm location decisions. However, in practice, the implementation of this methodology presents problems when one has to handle complex choice scenarios with a large number of spatial alternatives. We posit the Poisson regression as a tractable solution to these problems. We demonstrate that by taking advantage of an equivalence relation between the likelihood function of the conditional logit and the Poisson regression we can, under certain circumstances, easily estimate a conditional logit model regardless of the number of choices. This insight should be particularly useful for studies of economic location.

The Location of Foreign Direct Investment in the United States: Patterns and Determinants

The internationalization of the U.S. economy over the past fifteen years has had a discernible impact on regional development. This paper is an analysis of the regional effects of inward foreign direct investment, a particularly dynamic component of the internationalization process. Foreign direct investment dispersed over time, with the locations of foreign operations becoming more like those of U.S. firms. Regression results demonstrate that the location of foreign-owned property, plant, and equipment can be explained by variables representing: energy costs, infrastructure/transportation, and labor climate.

Accounting for Neighboring Effects in Measures of Spatial Concentration

A common problem with spatial economic concentration measures (e.g. Gini, Herfindhal, entropy and Ellison-Glaeser indices) is accounting for the position of regions in space. While they purport to measure spatial clustering, these statistics are confined to calculations within individual areal units. They are insensitive to the proximity of regions - to neighboring effects. Clearly, economic clusters may cross the boundaries of the regions. Yet with current measures, any industrial agglomeration that traverses boundaries will be chopped into two or more pieces. Activity in adjacent spatial units is treated in exactly the same way as activity in far-flung, non-adjacent areas. This paper shows how some popular measures of spatial concentration relying on areal data can be modified to account for neighboring effects and spatial autocorrelation. With a U.S. application, we also show that the new instruments we propose are useful and easy to implement.

The Viability Of Informal Microenterprise In South Africa

This paper analyzes entrepreneurs in South Africas informal sector. The aim is to determine the extent to which African informal retail trade spawns viable enterprises. To assess the prospects for South Africas informal retail sector, we obtained questionnaires from owners of small-scale establishments in a random sample taken throughout the country in 2007. Owners income and sales data provided a basis for investigating viability. Regression analysis tests hypotheses identified as crucial to higher income and sales, including startup capital, size, male/female ownership, business training and the proximity to shopping centers. Also tested is the influence of urbanization externalities on sales and owners income. Initial capital and positive urban externalities have a strong influence on the ability to generate a sustainable livelihood for informal entrepreneurs. After controlling for startup capital, location and other factors, it appears women entrepreneurs face distinct difficulties in generating a viable income through informal retail trade.

Attracting foreign investment through privatization: The Zambian experience

ABSTRACT Privatization serves as a potential source of foreign direct investment in Africa. During the Chiluba era (1991–2001), Zambia conducted one of Africas most sweeping privatization programs. Accordingly, direct investment swelled with the sale of state enterprises. This paper explores foreign and domestic ownership patterns following investor purchases of Zambian state-owned assets. Previous foreign owners of mining and manufacturing companies represent the principal sources of foreign capital received through privatization-the only real exceptions being expansions by South African firms. A difference of means test conducted on all known privatization cases reveals that foreign investors (outside South Africa) are more export-oriented than domestic investors and also buy higher-priced assets. South African investors, heavily concentrated in retail activities, are more likelyto have been involved in competitive acquisitions. Despite increased foreign investment during the 1990s, however, the economy has stagnated. Having sold most of its state assets Zambia, like other sub-Saharan Africa countries, must endeavor to attract investment through other channels.

Regional Incentives and Industrial Location in Puerto Rico

This study uses nested logit to estimate the influence of industrial incentives on the location of manufacturing plants in Puerto Rico. Puerto Rican laws grant generous tax exemptions and provide other incentives for investments in less developed, peripheral regions of the island. Focusing on Puerto Rico allowed us to isolate and test location factors in a closed environment where 76 municipalities received a development zone designation and competed directly against one another for new plants. Simulations indicated that the regional incentive policy reallocated relatively few of the greenfield investments from the congested core to the periphery of the island.

Measuring the Localization of Economic Activity: A Parametric Approach

The index proposed by Ellison and Glaeser (1997) is now well established as the preferred method for measuring the localization of economic activity. In this paper we develop an alternative localization measure that is consistent with the theoretical framework originally proposed by Ellison and Glaeser. Our measure follows directly from the Random Utility (Profit) Maximization (RUM) location decision model. Because the distributional assumptions in our model are fully compatible with RUM, we are able to offer a more efficient measure of industry clustering.

Adding a Stick to the Carrot: Location Incentives with Clawbacks, Recisions, and Recalibrations:

The escalation of incentive awards to attract and retain new business has emerged as a major concern in state and local development policy. This article addresses claw-back provisions, a largely neglected part of the bargaining process between governments and businesses in the location of new plants and offices. Just as private business transactions work within a framework of legally binding contracts, clawbacks provide some recourse to reclaim all or some of a financing package when a firm fails to meet performance requirements. Besides analyzing clawbacks, the authors identify three related areas for policy intervention: penalties, recisions, and recalibrations. The aim of this article is to show that U.S. policymakers can avoid expensive mistakes if they tie incentives to written guarantees of job creation and other benefits. European regional policymakers have used a carrot-and-stick approach to industrial recruitment. Increasingly, state and city governments in the United States also recognize that public-private bargaining requires some form of reasonable, guaranteed quid pro quo.

Foreign firm entry in an open economy: the case of Portugal

The purpose of this paper is to analyse the entry process of foreign direct investment (FDI) in Portuguese industrial sectors. Portugal presents an interesting case where firms enter to take advantage of export opportunities. The results suggest that foreign firms possess the ability to overcome existing entry barriers that affect domestic firms. Apparently, foreign firms have different expectations about profitability than domestic firms, possibly due to foreign firms’ export-orientation to the rest of the European Union (EU). They appear to desire industries where other foreign firms have clustered. Above all, it appears that these foreign firms enter industries to exploit Portugals chief location advantage in Western Europe: low wages. Portugals FDI experience is relevant to other countries that have opened their economies to greater trade and investment and attracted export-oriented firms.