Économie et Statistique n° 426 - 2009 The "Living Environment and Security" Survey in the victimization data series - Wage bargainind in France - Internationalization and location of Services
Internationalization and Location of Services: a Sectoral and Functional Analysis Applied to Multinational Firms in Europe
International investment in services has risen substantially in the past twenty years. The trend is visible at two levels: (1) the sector level, via the internationalization of service sectors; (2) the functional level, via the relocation abroad of service functions such as head offices, R&D centres, distribution facilities, sales offices, provision of services, and call centres and online services. Given this context, it is important to identify the criteria that determine the relocation of such activities abroad. Our article seeks to verify the existence of specific location criteria for the service sectors (as distinct from manufacturing) and for service functions (as distinct from production facilities). The econometric analysis is based on 13,902 investment decisions by multinational firms in Europe in the period 2002-2006. The location criteria already identified for manufacturing activities also apply to services, with some specific adjustments. The analysis by industry shows that market access and local skills play a particularly important role in location decisions in the service sectors and suggests that the most developed economies remain attractive for services. The analysis by function confirms these results. The same factors influence location decisions for service functions, while cost considerations are more decisive for production facilities. However, these results do not apply to all service functions, particularly call centres and online services. Furthermore, the existence of complementarities in location rationales suggests that, in the longer run, service functions may follow the trend towards international redeployment of production capacity to Eastern Europe.