European Market Integration and the Determinants of Firm Localization – The Case of Poland

  • Abstract:

    The analysis of firm localization and of factors that contribute to a certain pattern of geographic concentration of economic activity has attracted attention not only of scientists, but also of policy-makers. This bulk of interest is mainly due to important implications in terms of internal and international competitiveness of industries as well as in terms of distribution of income. Moreover, the establishment of a common European market, with the aim to eliminate internal barriers of different nature, implies an environment where the standard localization determinants operate differently than usual or where new localization forces assume importance. The past empirical investigations of industrial location within Europe are rather scarce and dedicated especially to the old member states. Regarding the new EU member states from Eastern Europe, the only attempts to measure localization forces were provided by Cieślik (2005a and 2005b) who investigates the determinants of localization of the foreign multinational enterprises (MNEs) in Poland. Similarly to the two papers by Cieślik, Gauselman and Marek (2011) compare the factors determining the location choice of the MNEs in 33 regions of East Germany, Poland and the Czech Republic. Consequently, barely did past investigations try to find the general determinants of industrial location in the new member states. The paper analyses empirically the determinants of firms’ localization in Poland. We use regional data of the sixteen Polish administrative regions over the period 2003 to 2010 to examine which role agglomeration forces and other factors played in explaining the choice to operate in a certain location. Our results suggest that agglomeration economies stemming in particular from the R&D sector, as well as human capital and the infrastructure positively influence the regional localization of firms. Poland’s accession to the European Union had a positive impact for the location decision of new firms in the Polish economy.