Political risk as a determinant of investment by Spanish multinational firms in Europe

Abstract

This study seeks to analyse the impact of political risk variables in the location strategy of Spanish Multinational Enterprises (MNEs) in Europe. Evidence is obtained from the relevance of lower political constraints to attract investments, but the results also highlight the importance of cultural and geographical proximity, which may overtake inconveniences derived from higher corruption or lower economic-freedom levels. Population, low unemployment rates and previous international experience in countries all around the world are also found to play a key role as determinants of Foreign Direct Investment (FDI) location for Spanish firms.