Journal of International Management 5 (1999) 299–317 1075-4253/99 $ – see front matter © 1999 Elsevier Science Inc. All rights reserved. PII: S1075-4253(99)00017-4 Country location choices of service multinationals An empirical study of the international hotel sector Sumit K. Kundu a, *, Farok J. Contractor b a School of Business and Administration, Saint Louis University, 3674 Lindell Boulevard, St. Louis, MO 63108, USA b Department of International Business, Rutgers University, 180 University Avenue, Newark, NJ 07102, USA Abstract This article examines international country location choices for equity investment undertaken by global hotel chains. Why do certain host countries attract more hotel investment than others? A second underlying issue that we tackle in this article is whether the traditional foreign direct investment deter- minants used in past studies on manufacturing also apply to services—or whether service sector-spe- cific determinants are better explanatory variables for understanding the distribution of service foreign direct investment across countries. © 1999 Elsevier Science Inc. All rights reserved. Keywords: Service foreign direct investment; Location; International hotels 1. Introduction The service sector has grown rapidly in importance in both developed and developing countries in the past 25 years. Yet our understanding of the factors that impel or retard for- eign direct investment (FDI) is still drawn largely from manufacturing. The bulk of literature on FDI determinants concerns manufacturing, and not services. The share of services in the gross domestic product (GDP) of 55 out of 78 countries has increased in the last three de- cades (World Bank, 1992). In 1990, it averaged 45 percent and 61 percent for developing and developed countries, respectively (World Bank, 1992). Table 1 gives indicators for selected developed nations. The situation in developing nations varies substantially by country. For example, in Thai- land by 1990, the share of services was approximately 25.0 percent, in Pakistan 40.1 percent, for Chile 62.2 percent, for Venezuela 70.6 percent, and for Turkey 35.6 percent. Because ser- vice multinationals have emerged as a dominant economic force in several countries, several * Corresponding author: Tel.: +1-314-977-3601; fax: +1-314-977-7188. E-mail addresses: kundusk@slu.edu (S.K. Kundu), farok@andromeda.rutgers.edu (F.J. Contractor)