Multinationals are types of companies that offer services or products across national borders and are basic factors of globalization and economic development.
The most important factors in attracting direct foreign investments are the geographical location and the resources of the country. Also, the taxes in financial and economic sectors are worth to be mentioned. Multinationals tend to relocate their activities from economies with high taxes to economies with low taxes. Nevertheless, a country that has high taxes is most of the time a well-developed country and often multinationals choose this type of economy.
As a rule, a firm’s location decision is part of a three-step decision-making process which starts with:
- The firm’s decision to serve a foreign market.
- The choice to undertake foreign direct investment.
- The location choice.
According to recent studies, location decisions regarding the parent firm are similarly shown to be affected by parent-country taxation. Specifically, the parent firm is less likely to be located in countries with relatively high foreign-source income. Estimated tax sensitivities of location decisions vary with the number of countries considered as well as with the number of a multinational’s foreign subsidiaries.
The regional attraction of foreign direct investments is expected to evolve into an enhancement of local advantages. There are important benefits which brought the most significant impact on the number of newly established companies with foreign capital at regional level in Romania.
There is no secret anymore that Romania has grown to become an important country in the region for some major international companies. They offer service to regional and European customers from centers located in Romania. These companies which either run regional businesses from Romania, or run service centers supporting their various operations around the world are primarily in the pharmaceutical sector, research, banking, IT, outsourcing and technology. Also, important investments were made in extractive industry, manufacturing, electricity and oil.
Romania has significant energy resources which is translated in the concept of energy security, a strong impact for business environment, according to the European Commission.
In the global context, Romania has the advantage of an economic growth above average and the potential of Black Sea that is very attractive for the multinational companies from the energy sector.
Clearly, the location decision of multinational companies was influenced by the outsourcing to cheaper economies. The factors that led to location change were small prices, incentives and subsidies, low taxes, labor markets flexibility, the facility of opening and leading a business, infrastructure and accessibility as well as logistics. In conclusion, Romania shows some strong advantages confirmed by the large foreign investments made.
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