Foreign Direct Investment in Italy; the North-South divide

This paper offers a comprehensive and comparative analysis of Foreign Direct Investments (FDI) as pursued by companies aiming to establish a sustained presence in international markets, with a specific focus on Italy. The primary objective is to examine the role of FDI and the diverse factors influencing the selection of specific Italian regions as investment destinations, with particular emphasis on the disparities between Northern and Southern Italy. FDI serves as a fundamental strategy for achieving a long-term foothold in foreign markets. The decision on where to allocate investments within Italy is intricate and strategic, shaped by various economic, social, technological, and infrastructural factors. This study delves into these considerations to elucidate the factors guiding foreign firms in their choice between Italy’s North and South as FDI destinations. By employing a conditional logit model, the analysis incorporates critical variables, enabling an in-depth examination of the relative attractiveness of Italy’s regions. The paper begins by exploring essential concepts of FDI, highlighting their distinguishing features and reviewing pertinent literature. This foundation leads into a thorough analysis of Italy’s socio-economic landscape, examining its historical, cultural, and economic diversity that underscores the distinct characteristics of its Northern and Southern regions. This detailed contextualization helps illustrate why different parts of Italy attract varying levels of FDI. The primary analytical tool, the Conditional Logit Model, supports the evaluation of regional factors influencing FDI allocation across Italy. Additionally, this research provides insights into the motivations behind regional investment preferences, presenting a comparative perspective on the strategic choices made by foreign companies in Italy’s regions.