This study casts light upon the locational distribution of industrial activites of Japanese multinational corporations (MNCs) in the Czech Republic at the regional level from 1999 through 2004. In our study, McFaddens conditional logit model is applied to trace the dynamic effects of a series of factors on locational choices of Japanese MNCs. We found evidence that the locational choice of Japanese MNCs is positively affected by industrial agglomeration effects resulting from potential interactions across and within existing Japanese and foreign firms owing to mitigation of various transaction costs. In addition, the presence of well-developed infrastructure systems and high wage level determine the location choice of Japanese MNCs, while distance matters. The empirical evaluation also contends that spatial determinants of MNCs vary by nationality in the Czech Republic. It is evident that agglomeration externalities and distance emerge as critical driving factors for Japanese MNCs and Asian MNCs. On the other hand, it has been verified that fiscal and financial incentives tend to highly motivate German MNCs, while local demand conditions have a great impact on Anglo-American MNCs.