Political risk as a determinant of investment by Spanish multinational firms in Europe

Abstract

This study seeks to analyse the impact of political risk variables in the location strategy of Spanish Multinational Enterprises (MNEs) in Europe. Evidence is obtained from the relevance of lower political constraints to attract investments, but the results also highlight the importance of cultural and geographical proximity, which may overtake inconveniences derived from higher corruption or lower economic-freedom levels. Population, low unemployment rates and previous international experience in countries all around the world are also found to play a key role as determinants of Foreign Direct Investment (FDI) location for Spanish firms.

Acknowledgements

The authors are grateful to professors Gabriel R. G. Benito and Davide Castellani for their helpful comments and to Spanish Ministry of Science and Innovation (program FPU) and Caja de Burgos for financial support.

Notes

¹Investments in Cyprus and in Malta are not included in the sample either as no reliable data were found for the variables used in the study.

²The list of companies is available upon request.

³Available upon request.