Firm relocations in the Netherlands: Why do firms move, and where do they go?

Abstract

This study analyses determinants of business relocation and identifies regional characteristics which attract relocating firms. Results indicate that the relocation decisions of firms are sector-dependent, and the migratory behaviour of firms in knowledge-intensive sectors notably differs from that in less knowledge-intensive sectors. Predominantly low-tech and medium-low-tech manufacturing and less knowledge-intensive service firms paying high average salaries have a higher probability to move out of their present location. For less knowledge-intensive service firms, the average municipal wage negatively affects their propensity to relocate, while those located in municipalities with high sector-specific wages have an increased likelihood to move. Relocating firms are generally attracted by densely populated municipalities with high wage levels, and primarily service firms are drawn to municipalities which are specialized in the firm's own sector and appeal to individuals. Sector-specific wages may either attract, or deter firms, suggesting that this variable may capture both the cost and the quality of the locally available workforce.

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