Ilaria Mariotti, Ila Maltese and Flavio Boscacci on "LOCATION CHOICE OF INWARD LOGISTICS FDI IN ITALY"

1. LOCATION CHOICE OF INWARD LOGISTICS FDI
IN ITALY
Ilaria MARIOTTI
Ila MALTESE
Flavio BOSCACCI
DiAP, Politecnico di Milano
INPUT 2012
University of Cagliari
Cagliari, 10 - 12 / 05 / 2012

2. STRUCTURE
• Aim of the work
• Literature review on FDI in the logistics industry
• Data and methodology
• Descriptive statistics, Econometric analysis
• Results
• Conclusion and discussion

3. 3
Aim of the work
Investigating the location factors
of inward logistics FDI in Italy
(subsectors 60, 61, 62, 63 – ATECO 2002)
in 103 Italian NUTS3 provinces
in 1997-2002

4. 4
Literature
Manufacturing investments’ location factors are also
relevant for the service sector
among the others: Boddewyn et al., 1986; Li and Guisinger, 1992;
Gerlowski et al., 1994; Nachum and Wymbs, 2002; Oum and Park,
2004.
Manufacturing and service FDI’s location factors
italian case studies: Mariotti and Piscitello, 1995; Basile, 2004;
Basile et al., 2005; Bronzini, 2007;
foreign case studies: Coughlin and Segev, 2000; Auranzo-Carod et
al., 2008
Logistics FDIs location factors
Hong, 2007a, 2007b China
Berkoz and Turk, 2008 – Odemir and Darby, 2009, Turkey
Boscacci et al.. 2009, Italy

5. 5
Location factors
Traditional location factors
Labour and land markets, demand market, land, agglomeration economies,
transportation costs, other costs
Infrastructures, services and intangible assets
Accessibility, utilities’ quality, business services, scientific and technological
assets
Environmental and social context
Social degradation, economic, political and social instability, local climate
Policy framework
Competition policy, trade policy, tax policy, environmental policy
Information costs
Geographical distance from the core (of city, region, nation), geographical
proximity to the home country, cultural distance, FDI penetration

6. 6
Traditional Factors
Key location factors at the regional and local level
Market size, growth and competitiveness
Labour market: costs, availability, skills and unionization
Land market: costs and availability
Agglomeration economies
Transport costs
Other costs (taxes and financing)

7. 7
More innovative factors
Transport and communication assets and infrastructures
Technological innovation level
Incentives and subsidies (policies and taxes)
Environmental and social context (climate, instability, etc...)
Reduced transaction costs (Info costs: e.g.
geographical and cultural proximity...)

8. 8
Logistics FDIs location factors
The studies on logistics suggest that FDI are positively correlated with the
main location determinants:
Market size
Labour market
Agglomeration economies
Transport infrastructure
Public incentives

9. 9
Location factors impacts
Research has mainly focused on manufacturing investments’ locations,
but both the theoretical and empirical studies affirm that the same
factors could be relevant for the service sector.
The studies on logistics suggest that FDI are positively correlated with
the main location determinants:
market size;
skilled, but not too expensive, labour force;
the presence of other MNE (intra and inter-industry agglomeration
economies and reduced communication costs);
local fiscal incentives, and the degree of economic privatization;
good infrastructural assets (Hong, 2007a, 2007b; Bowen, 2008; List,
2001; Cheung and Stough, 2006).

10. 10
Italian logistics sector
• a large number of small and mid-sized companies,
• on average, 4.2 employees (Istat, 2003).
The Italian transport and logistics sector is the most fragmented in Europe,
even with a growing concentration (ISTAT, 2008).
This makes Italy less competitive in the global scenario but attractive for
the global players, which enter the market through mergers and
acquisitions (M&A) of Italian firms (brownfield investiments) and new
companies (greenfield investiments).

11. 11
DATA and methodology
In 1997: 130 FDI
In 2002: 258 FDI, undertaken by 152 foreign MNE
(LogINT Observatory).
The logistics inward FDI growth is modeled by means of
a Logit model linking the probability for the Italian
provinces to have experienced an increase in logistics
inward FDI to a set of explanatory variables.

12. Inward FDI in the Italian logistics sector
Inward FDI in the more value-added activities: ”supporting and
auxiliary transport activities” (forwarders, integrated logistics,
intermodal transport, cargo handling and storage, firms managing
transport infrastructures) - subsector 63:
18%
12%
3%
67%
60 Trasporti terrestri
61 Trasporti marittimi
62 Trasporti aerei
Attività di supporto e ausiliarie dei trasporti
63

13. Geographical distribution
mainly located in:
• in the North West
• the province of Milan
45,0 41,6
40,0
35,0
30,0
25,0
20,0
15,0 12,4 11,1
10,0 6,4 5,9
5,0 2,4 2,3 2,2 2,0 1,9
Besides, the majority of the 0,0
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MNEs investing in the Italian om
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logistics sector originate from
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Western Europe.

14. Y p96
14
Logit model
Dependent variable: inward logistics FDI’s variation/change of in the four
logistics sub-industries l (60, 61, 62, 63) in the NUTS3 provinces (p) in
1997-2002.
Market size
Agglomeration economies
Transaction costs reduction
Infrastructural assets

15. 15
Econometric analysis
Model 1 Model 2 Model 3 Model 4 Model 5
1.5656***
Yp96
Durb96 1.4205*** 1.3372***
p
00 0.4416** 0.3386**
∑ FDI
t =94
m
p
IMNEJ l96 0.2639*** 0.3136***
,p
0.6229*** 0.8365*** 0.8888***
Age l , p
Road 0 4 1.2627** 1.8732*** 1.8817*** 0.9180* 0.8863
p
1.3115** 0.9840** 0.8557* 1.4313*** 1.1063**
Rail 0 4
p
04 -0.2803 -0.4438*** -0.3656** -0.2318 -0.1806
Port p
04 0.8519*** 0.3186 0.2710 0.8364*** 0.7163**
Air p
D-Ind. Yes Yes Yes Yes Yes
D-Marea. Yes Yes Yes Yes Yes
n. obs. 408 408 408 408 408
Log -58.8172 -70.2192 -63.4956 -73.3427 -67.1183
Likelihood
PseudoR2 0.5346 0.4443 0.4976 0.4196 0.4689

16. 16
Results
Positive and significant impact:
market size
infrastructure provision
agglomeration economies
the age of the first investment Information
the presence of Italian logistics MNE cost reduction
inward FDI are more willing to be located in the core
area of the country, specifically in the north west
have a preference to be active in the higher added values
sub-sectors.

17. 17
Conclusion
the market-stealing effect for domestic logistics firms
vs
Employment growth (by the MNE and by its local suppliers);
more efficient and effective logistics system;
knowledge spill-overs towards domestic suppliers and
competitors, and possible spin-off firms;
backward and forward linkages
attractiveness for manufacturing firms,

18. 18
Conclusioni (1)
IMN straniere adottano la strategia “market seeking”
prediligono le aree in cui i flussi sono più consistenti e in cui vi è
una prevalenza di imprese manifatturiere di medie e grandi
dimensioni (> outsourcing)
necessitano di forza lavoro qualificata
ricercano i vantaggi derivanti dalla concentrazione di altre
imprese logistiche (Ec. Localizzazione) e di attività produttive
e residenziali in ambito urbano (Ec. Urbanizzazione)
si localizzano nelle province in cui la dotazione
infrastrutturale è maggiore
investono nei settori a maggiore valore aggiunto (I 63)
prediligono il nord-ovest del Paese

19. 19
Settore della logistica
Imprese appartenenti al settore ATECO “I – Trasporti, magazzinaggio e
comunicazioni”:
60 “Trasporti terrestri e trasporti mediante condotte”;
61 “Trasporti marittimi e per vie d'acqua”;
62 “Trasporti aerei”;
63 “Attività di supporto e ausiliarie dei trasporti e attività delle agenzie di
viaggio” (movimentazione merci, magazzinaggio, spedizionieri, operatori
trasporto intermodale, integratori logistici);
64 “Poste e telecomunicazioni” (corrieri): sono state escluse, a causa
dell’impossibilità di estrapolare 64.2 (Media e TLC).
Ampia definizione del settore logistico: insieme delle imprese che
svolgono in conto terzi servizi di movimentazione di merci e
persone

20. Suggestions are welcome
Flavio Boscacci
Ilaria Mariotti
Ila Maltese
DiAP, Politecnico di Milano
Ila.maltese@polimi.it