A Quantitative Investigation in the Determinants of Location Decisions in Global Production Networks

Global Production Networks (GPN’s) have received a lot of attention in theoretical papers, especially in the field of economic geography. The complexity of this concept, due to the dynamic character and the embeddedness in different social and cultural regions, seems to be a barrier for quantitative research on the topic. This paper analyses the three main determinants of GPN’s as provided by the literature, speed, costs and flexibility, by testing the importance of these determinants for the location decisions of firms in different parts of the value chain in different industries. Analysing the location decisions by using these determinants could give an empirical foundation to the mainly theoretical approach of this topic. This evidence is relevant for both academic and policy reasons. If there are certain determinants that drive the location decisions of firms for a particular part of the value chain, then governments could focus their policies in order to attract more FDI investments. Based on the main findings it is questionable whether value chains are globally distributed. Next to that, the findings in this study suggest that the determinants speed and costs seems relevant for location decisions. The relevance of flexibility as a determinant is questionable, though the proxies used in this study may not be optimal measures for flexibility.