Journal of Applied Economic Research
ISSN 2712-7435
Factors Determining Enterprise Location Choice in the Cities of Russia
Mariev O.S., Davidson N.B.
Abstract
Enterprise location choice has both an economic and social meaning for a city, being closely linked to the availability of well-paid jobs and personal development. Indeed, the availability and quality of jobs depends on enterprises, and this directly affects the professional development of personnel and the quality of life in the city. Therefore, the success of a city depends on whether firms find it attractive for their activities. Based on firm level data covering national and foreign enterprises augmented with city and regional data, we study enterprise location decisions in Russia. The impact of the agglomeration level, home market potential, transport infrastructure, business environment on firms’ location decisions is analyzed based on profit equation. Analysis is carried out on a city level taking into account regional factors as well. It is assumed, that firms choose location where they can earn the highest profits. The results confirm that agglomeration levels and the home market potential affect the choice of location choice by national and foreign firms. Diversified economies and home market potential positively affect location choice, while cost savings associated with location have an inverted U shape. Estimations shows that foreign enterprises are interested in large demand, i.e. they pursue a strategy for finding a market. They do not seem to be interested in lower wages, i.e. to pursue an efficiency strategy. Assuming that there are more innovations in diversified cities and cities with a favorable business climate, a strategy of asset seeking might be present. The results also confirm a negative impact of regional business environment risks on foreign firms’ location choice. The results will be useful for improving the regional policy aimed at business development and attracting foreign direct investment.
Keywords
enterprise location choice; cities, regions; agglomeration economies; business environment; foreign direct investment; Russia
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About Authors
Mariev Oleg Svyatoslavovitch – Candidate of Economic Sciences, Head of the Department of Econometrics and Statistics, Graduate School of Economics and Management, Ural Federal University named after the first President of Russia B.N. Yeltsin, Ekaterinburg, Russia (620002, Ekaterinburg, Mira street, 19); e-mail: o.s.mariev@urfu.ru.
Davidson Natalia Borisovna – Philosophiae Doctor, Senior Lecturer, Department of International Economics, Graduate School of Economics and Management, Ural Federal University named after the first President of Russia B.N. Yeltsin, Ekaterinburg, Russia (620002, Ekaterinburg, Mira street, 19); e-mail: natalya.davidson@gmail.com.
For citation
Mariev O.S., Davidson N.B. Factors Determining <st1:city w:st="on">Enterprise</st1:city> Location Choice in the Cities of <st1:place w:st="on"><st1:country-region w:st="on">Russia</st1:country-region></st1:place>. Bulletin of Ural <st1:place w:st="on"><st1:placename w:st="on">Federal</st1:placename> <st1:placetype w:st="on">University</st1:placetype></st1:place>. Series Economics and Management, 2018, Vol. 17, No. 6, 950–969. DOI: 10.15826/vestnik.2018.17.6.042.
Article info
Received November 1, 2018; Accepted November 15, 2018
DOI: http://dx.doi.org/10.15826/vestnik.2018.17.6.042
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