Vertical Industry Linkages and the Location of Foreign Direct Investment in Poland

We study the determinants of locational choice for new foreign affiliates across Polish regions with special focus on the role of agglomeration externalities using a conditional logit framework and firm-level data from the Amadeus database and a Polish dataset on regional and industry-region characteristics at the NUTS 2 level. The estimation results show that higher local demand agglomeration increases the probability that a foreign parent company founds an affiliate in a certain Polish region, whereas adverse labor market conditions, which manifest themselves in high unemployment and low wage rates, negatively affect the location probability.