Policy Support Schemes and MNE Investment Location Choice

Studies confirm that policy support – operationalized as subsidies – drives foreign investment location choices (LC). However, prior work treats policy support as monolithic. This study investigates the effect of policy support on LC along two dimensions: Direct vs. indirect and firm-specific vs. non-firm-specific policy support. We argue that direct policy support (e.g., cash) has a greater positive effect on LC than indirect policy support (e.g., tax rebates). Further, we argue that non-firm-specific policy support (by application) has a greater positive impact on LC than firm-specific policy support (for single firm). We test our assertions on data of US firms and their LC in the EU and China. We find support for our hypotheses, contributing to the strategy literature by establishing a nuanced understanding of policy support.