The survival of foreign affiliates in developed countries: a location-based analysis

In the context of a local economy, the attraction of foreign investment is key player, given the positive effects that arise, both directly and indirectly, within the host region. This paper assesses the impact of regional characteristics, such as an R&D-friendly economic environment and institutional quality, on the longevity of companies targeted by foreign investments. We examine the survival probability of a sample comprising over 100,000 foreign-owned manufacturing firms operating within the European Union (EU-28). A multi-level approach enables the evaluation of both firm- and location-specific features at two distinct geographical scales. Our findings indicate that government quality within national boundaries plays a pivotal role, not only in attracting foreign capital but also in promoting a long-term presence. Financial development at the national level exerts a profound influence on the survival of foreign affiliates, reducing the risk of exit by approximately 99%.