The Role of Location as a Selection Criterion in FDI: The Case of SMEs in Greece

Abstract

The study examines the internationalization of Greek SMEs in Western Europe and the Balkan area, focusing on the role of location as a selection criterion in their FDI decisions. Data aimed at capturing SMEs’ perceptions with regard to incentives affecting their FDI based on location criteria. We find that location plays a significant role with regard to the benefits that firms gain, highlighting OLI paradigm's theoretical relevance in the examination of FDI, while presenting internationalization trends in the global environment. Findings further contribute to the adaption of effective practices to enhance firms’ competitiveness through more rational and targeted investment decisions.

KEYWORDS:

• foreign direct investment (FDI)
• internationalization
• location selection criteria
• OLI paradigm
• small and medium-sized enterprises (SMEs)

Notes

Please see Appendix A for further details on key facts regarding the economy of Greece.

SMEs should meet the following criteria: (1) employ less than 250 employees, (2) their annual turnover does not exceed €50 million or their annual balance sheet total does not exceed €43 million, and (3) be an independent firm, that is, no more than 25% of total shares are held by any other firm (or joint firms) unless they are also SMEs (López-Gracia and Sogorb-Mira 2008).