Competing for capitals: the great fragmentation of the firm and varieties of FDI attraction profiles in the European Union

Economic globalization has pressured countries to compete with one another forfirms’ investment capital. Analyses of such competition draw heavily on foreign dir-ect investment (FDI) statistics. In and of themselves, however, FDI statistics aremerely a quantification of the value of firms’ investment projects and tell us littleabout the heterogeneity of these projects and the distinct patterns of competitivedynamics between countries they generate. Here, we create a more sophisticatedunderstanding of international competition for FDI by pointing out its variegatednature. To do so, we trace the ‘great fragmentation of the firm’ to distinguishbetween five categories of FDI: manufacturing affiliates, shared service centers, R&Dfacilities, intermediate holding companies, and top holding companies. Using anovel combination of firm-level and country-level data, we identify for each of thesedifferent categories which European Union member states are most successful inattracting it, what macro-institutional and tax arrangements are present in them,and what benefits they receive from it in terms of tax revenues and employmentcreation. In this way, we are able to identify five distinct ‘FDI attraction profiles’ andshow that competition increasingly appears to take place amongst subsets of coun-tries that compete for similar categories of FDI.