Geography as a locational determinant of foreign direct investments in tourism and transport in Greece: a comparison with domestic investments

Abstract

It is widely known that inward foreign direct investments contribute to the economic growth of a host country. Each country attracts foreign investments by shaping and improving its location advantages, such as geography-driven advantages. Using questionnaire survey data from domestic and foreign direct investments of the main sectors of the Greek economy, i.e. the tourism and transport sector, principal component analysis and multinomial logistic regression models, this paper investigates the influence of the natural geography of Greece, known as ‘first nature’ of geography, and that of the interactions between economic agents, known as ‘second nature’ of geography, on attracting foreign investments in these two sectors in comparison with domestic investments, after controlling for some other characteristics, such as the quality of institutions and infrastructure. As far as the tourism sector is concerned, ‘first nature’ factors are more important than ‘second nature’ ones. The results confirm that climate, quality of natural environment, cultural resources and morphology of Greece are key locational determinants not only for the attraction of domestic investments but also for those of foreign investments. As for the transport sector, sea access, morphology and distance from competitive firms are more important geographic factors when compared with the other sectors of the Greek economy. The results also indicate that the geographic location and climate of Greece are the most important geographic factors in attracting transport foreign investments. Overall, investors recognize geography as a key determinant for the location of an investment. © 2020, Springer Nature B.V.