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The Strathprints institutional repository is a digital archive of University of Strathclyde research outputs.

Strathprints serves world leading Open Access research by the University of Strathclyde, including research by the Strathclyde Institute of Pharmacy and Biomedical Sciences (SIPBS), where research centres such as the Industrial Biotechnology Innovation Centre (IBioIC), the Cancer Research UK Formulation Unit, SeaBioTech and the Centre for Biophotonics are based.

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Multinational Firms: Easy Come, Easy Go?

Wooton, I. and Haaland, J.I. and Faggio, G. (2003) Multinational Firms: Easy Come, Easy Go? FinanzArchiv, 59 (1). pp. 3-26. ISSN 0015-2218

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Abstract

It is often argued that countries with more flexible labor markets are better placed in attracting inward investment from multinational firms (MNEs). This is an issue when there is uncertainty in the marketplace and the firm faces some risk of closure of its branch plant. We study the MNE's location choice, explicitly taking into account exit, as well as entry, costs. We show that worker protection, through lay-off rules, deters potential investment in risky industries. Using evidence on MNE investment in Eastern Europe, we find support for our prediction that labor-market flexibility makes a location more attractive to the MNE.