1. ¹Departamento de Administración y Economía de la Empresa, Universidad de Salamanca, Spain
2. ²Departamento de Economía de la Empresa (Administración, dirección y organización), Universidad Rey Juan Carlos, Madrid, Spain

Correspondence: J I Galan, Universidad de Salamanca, Facultad de Economía y Empresa, Departamento de Administración y Economía de la Empresa, Campus "Miguel de Unamuno", Salamanca 37007, Spain. Tel: +34 923 294400 3329; Fax: +34 923 294715; E-mail: jigalan@usal.es

Received 13 January 2005; Revised 11 December 2005; Accepted 25 January 2007; Published online 12 July 2007.

Abstract

On the basis of theoretical assumptions approached via the investment development path (IDP), this study examines the most important factors for and against the location decisions in foreign direct investment taken by multinational enterprises, considering host countries at very different stages of economic development (Latin American and European Union countries). We carry out different kinds of analysis on a sample of 103 firms belonging to a medium-sized country that has recently achieved the status of developed country. The results reveal that the importance that home country firm managers give to diverse location factors depends to a certain extent on the stage that each group of host countries has reached in the IDP. In line with prior research, we find that firm managers consider mainly the group of factors associated with strategic asset-seeking when deciding to locate their investments in the group of more developed countries (European Union). In contrast, our results show that when these firm managers choose the group of less developed countries (Latin America), social and cultural factors play a more determinant role, thus suggesting the importance of historical and cultural ties between the home and host countries.