THE INFLUENCE OF POLITICAL CONDITIONS ON FOREIGN FIRM LOCATION DECISIONS IN THE AMERICAN STATES (1974-1989)

Over time, the changing nature of federal and state relations has resu lted in much of the responsibility for economic development to be cent ered at the state level. In attempts to foster potential economic grow th, the states have engaged in high-priced games of luring foreign fir ms with incentive packages, business climates, and recruitment strateg ies. While both the intensity and scope of their efforts has increased over time, relatively little is known about how political conditions, such as governmental institutions, political parties, and policy inst ruments influence foreign firm location decisions. Using a regional an d time effects Poisson analysis this study seeks to explore how state political conditions influence firm location decisions over time. The findings indicate that labor market conditions, the existence of agglo meration economies, access to markets, taxes, governmental institution s, policy instruments, and the national context are significant factor s in determining firm location decisions and that the factors influenc ing firm location decisions vary over time.