Systems competing for mobile factors: decision making based on hard vs. soft locational factors

The paper explores the links between capital relocation and soft locational factors addressing the quality of the business environment and the quality of life within the European Union. System competition is viewed as a competition between countries for the mobile factors capital and labour. The issue of systems competition is topical and insufficiently explored by contemporary literature. The scarcity of scientific papers describing the links between system competition theories and contemporary corporate geography theories, especially of the ones including the analysis of soft location factors, is a challenging aspect, which motivates the choice of this subject. This paper’s primary aim is to deliver an overview of the basic corporate geography conceptions, stressing the importance of soft location factors in today’s competition between systems for the mobile factors capital and labour. The paper further contains an analysis of the correlations between indicators regarding the institutional design of countries as developed by the World Bank (Ease of Doing Business), the Happiness Scale and the latest available data of FDI Stocks for the EU countries (2016). The relevance of such a study is based on the evidence that the contemporary business education relies on an extensive knowledge of the business environment. In the circumstance of similar infrastructural conditions, the main difference between locations is made by soft location factors. Since developed economies are characterised by a high degree of ubiquity of soft factors, the paper concludes that developing and emerging economies should foster the development of their soft location factors.