FDI AND LOCAL CAPABILITIES IN PERIPHERAL REGIONS: THE ETNA VALLEY CASE

This article analyzes the locational preferences of transnational corporations across provinces sub-regional political and economic territorial units) of Sicily (Italy) at 2001 in the light of an incentives programme granted under a new regional development policy. The issue is particularly timely due to the rediscovery of space as a crucial element in economic activity. Scholars are paying increasing attention to sub-national units. However, they have focused mostly on core regions, neglecting the peripheral ones. Moreover, even the few studies investigating the activities of transnational corporations in peripheral regions have disregarded intra-regional disparities due to constrains of data availability. This article, based on a unique set of data, shows through a Poisson regression model that, unlike what is predicted by the current literature, the locational preferences of transnational corporations in Sicily are driven by local high-skilled competences (also reflected in high wages), high degrees of trade openness, proximity to universities, and low information costs. The econometric results also suggest an agglomeration of foreign affiliates in electronics, and chemicals and pharmaceuticals in what has been named the “Etna Valley”. However, while local productive (and indirectly technological) competences in chemicals and pharmaceuticals have acted as a catalyst for foreign direct investment in the province, these competences were initially lacking in electronics