This study analyzes empirically the firm's decision to invest abroad and the effect of changes in labor costs and market size on affiliate employment in different locations. Using a dataset on Swedish multinational firms, we find that the probability of observing affiliates in a host country is influenced by local labor costs and market size as well as labor costs and market size in similar locations where the firm has not set up any affiliates. We do not find any strong evidence of either substitution or complementarity between existing affiliates or the Swedish parents.