The West Midlands has long been established as a major European region for attracting inward investment. In 2000 it was the UK's most successful region in attracting foreign direct investment, and was amongst the top five in Europe. Of the 40 per cent of foreign investment in the EU, the West Midlands consistently secures 20 per cent of these projects.
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Much of the FDI into the West Midlands has traditionally been headed by activity into the industries in which the region is strong, such as automotive, added value engineering, rubber and plastics, manufacturing and food and drink. However, towards the end of the 1990s the region has found some success in attracting business service companies and in particular Information Technology and software companies. For example, in 2000 the region had 116 enquiries from software companies compared to 97 from engineering companies and 81 connected to the automotive industry. Overall, the flow of FDI into the region can be seen in the fact that in 2000 the West Midlands attracted a total of 103 overseas investments with a recorded capital expenditure totalling in excess of L2.2 billion, creating 4,772 jobs and safeguarding a further 20,650.
If the stock rather than the flow of FDI into the region in 2000 is considered, the region contained six of the top ten software companies together with 18 of the top 20 global automotive suppliers, 25 of the top 30 global automotive plastics suppliers and a host of global telecommunications companies (Advantage, 2000). In fact the region has the strongest regional financial services sector outside London. In total by 2000 more than 223,000 people were employed through FDI within 1,925 companies (over a third of which have moved into the region since 1991) from a range of host economies including the USA, Germany, Japan, France, Taiwan, the Netherlands, Switzerland and Sweden. These companies include BMW, Denso, Ford, Fujitsu, Magneti Marelli, NEC, Oracle, Peugeot, GAP and OSI Pharmaceuticals.
What leads the region to be so attractive to FDI? Advantage West Midlands (2000) suggest the following. "The region boasts a skilled and dedicated workforce of more than 2.4 million people, who have consistently demonstrated their versatility, flexibility and competitive instinct over many years. They are ready to be flexible in working practices and committed to meeting targets". In addition the workforce is seen as highly skilled with the region generating 34,000 new high quality graduates from its nine universities each year. These together with its 60 higher and further education colleges provide a ready supply of welleducated graduates particularly in the area of Information Technology. The region is also seen as a relatively low cost of living area and its location at the very centre of the UK's transport infrastructure is also considered to be of major importance. "High quality and highly reliable road, rail and sea connections are all part of the region's well-developed and extensive transport infrastructure, all supported by an advanced telecommunications network' (Advantage West Midlands, 2000). Seventy five per cent of the UK's population is within a half-day truck drive of the West Midlands and this has resulted in more than 300 major distribution companies establishing themselves within the region.

Increasingly the world is becoming globalised and the riots at Seattle, Stockholm and Genoa provide some evidence of the power and control of Multinational or Transnational Companies (MNCs/TNCs) and the subsequent backlash against this. The forces that have led to the growth of MNCs/TNCs are manifold but would include the reduction in trade barriers, the development of the global triad trading block system (South East Asia and China, Europe, and North America), the liberalisation and deregulation of markets, the move towards world-wide privatisation, strategic decisions by organisations that wish to dominate world markets as their domestic market growth rates have slowed down, and the increased competition some organisations are finding in their domestic markets. All these factors together have seen the growth almost year-on-year of foreign direct investment (FDI), as organisations seek to take advantage of market and cost saving opportunities both within Europe and in the UK in particular.
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Whilst a growing number of econometric and survey-based studies have been published that focus on the key influences which determine inbound FDI at the national level, relatively few studies exist into the forces which affect the distribution of FDI between UK regions. The aim of this paper is to rectify this omission by seeking to identify and analyse a set of factors that influence the attraction of inbound FDI to UK regions.
LOCATIONAL CHOICE OF FDI BY TNCs
Theoretical work by Stopford and Strange (1991) and Dunning (1993) suggests that four main factors determine the national and regional location of FDI by transnational corporations (TNCs). These are: (physical, labour or technological); the search for markets (following customers, suppliers or competitors abroad, seeking increased familiarity with the local business environment or reducing their costs of supplying a foreign market); the search for efficiency (exploiting different factor endowments, cultures, institutional arrangements, economic systems and policies and market structures); and finally the search for strategic assets (enabling them to sustain and advance their international competitive advantages). In addition, national and regional resource endowments; market access and potential; favourable competitive positions; strong consumer demand; and favourable government policies can all help in attracting FDI to specific national and regional locations.
This paper focuses on three main 'influencers' of inbound investment: market, resources, and efficiency-seeking FDI. Strategic asset-seeking FDI is excluded from the study, since it proved incapable of measurement using the published UK data available at the time of the preliminary study.
EARLIER STUDIES
Studies carried out in the USA and the UK provide further support for the importance of resources, market and efficiency considerations in determining the distribution of inbound FDI at the regional level. A number of American studies (Bagchi-Sen and Wheeler, 1989; McConnell, 1980; Mandell and Killian, 1974; Arpan and Ricks, 1995) suggest that market-related factors, such as market proximity, population size and growth rates, levels of per capita retail spending and regional infrastructure provision are also found to be of importance in attracting FDI at the regional level. Other studies (Little, 1978; Glickman and Woodward, 1988; Mandell and Killian, 1974 and Arpan and Ricks, 1995) indicate that the location of FDI is especially sensitive to resource-based influences, such as labour availability, wage differentials and educational attainment levels. Efficiencyrelated factors including government aid, state spending levels, regional taxation levels and the level of industrial development in host regions are also significant (see McConnell, 1980; Mandell and Killian, 1974; Arpan and Ricks, 1995).
Studies based on UK regional data provide broad support for these American findings. Market-related influences such as infrastructure investment (Hill and Munday, 1991) and high population density (Billington, 1999) are considered to be significant in attracting inbound FDI to particular UK regions. In terms of resources, Billington (1999) suggests that high unemployment and related labour availability can both exercise a significant positive impact on FDI inflows at the regional level, whilst Collis and Noon (1994) show that high unit wage costs can have the opposite effect. Taylor (1993) and Billington (1999) provide evidence of efficiencyseeking FDI, arguing that preferential assistance to depressed regions and the regional industrial mix both exert a strong influence on the distribution of inbound FDI amongst UK regions. Hill and Munday (1991 and 1992) also find that government regional policy, based on regional preferential assistance and infrastructure spending, can help in attracting FDI towards particular UK regions.
CHANGES IN THE REGIONAL DISTRIBUTION OF INBOUND FDI
Recent research evidence (Roberts et al, 1988; Collis et al, 1989; Hill and Munday, 1992, Meyer and Qu, 1995) suggests that changes have occurred in the distribution of inbound FDI between UK regions since the early 1970s. The heavy concentration of FDI in the south-eastern core of the UK economy has given way to a more even distribution, in which peripheral regions such as Scotland, Wales and the North of England, and latterly, intermediate regions such as the West Midlands have been increasingly favoured by foreign investors. These findings form the basis for the present study, and for the choice of regions included in it.