International connectivity and the location of multinational enterprises' knowledge‐intensive activities: Evidence from US metropolitan areas (original) (raw)
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Global Cities as Innovation Hubs: The Location of Foreign R&D Investments by Multinational Firms
Academy of Management Proceedings, 2016
The increasing internationalization of R&D activities by multinational firms has spurred research on multinational firms? location choices for cross-border R&D investments. Extant research has examined such locational decisions primarily at the country level (e.g Bas & Sierra, 2002; Belderbos, Leten, & Suzuki, 2009; Kumar, 2001). This approach, however, contrasts with the stylized fact that multinational firms take regions or city areas across multiple countries into consideration when they decide on locations for R&D investments (Thursby & Thursby, 2006). In this study we take a global perspective to R&D location decisions and focus on the role of ?global cities? in attracting R&D investments by multinational firms. Historically, many innovations originate in large cities (Bairoch, 1991; Jacobs, 1969) and cities are often viewed as engines of technology growth (Fujita, Krugman, & Venables, 1999; Henderson, 2007). ?Global cities? are those major metropolitan areas characterized by a high degree of connectivity; a cosmopolitan cultural environment; and a rich supply of advanced producer services (e.g Goerzen, Asmussen, & Nielsen, 2013; Sassen, 2006). They host a disproportional share of skilled workers, innovative companies, prestigious universities and other high quality public and private institutions (Mastercard, 2008). These global cities are viewed as important locations for multinational firms, as they often serve as command and control nodes in the ?global reach? of worldwide production by large corporations (Friedmann, 1986; Taylor, 2004). Notable examples of such global cities are
This paper examines how the characteristics of local inter-firm networks affect the location of subsidiary research and development (R&D) facilities. It distinguishes between subsidiary R&D that is competence-creating (creates new lines of technology for the multinational corporate group) and competence-exploiting (adapts established lines of technology). The key dimensions of local networks are the degree of cross-firm concentration or diversity in the relevant industry, and the relative presence of domestically-owned versus foreign-owned firms. The empirical investigation uses patents granted in the US to the world's largest industrial firms for inventions achieved in their European-located operations, classified by the host European region in which the research facility responsible is locate, over the period 1987-1995. Intra-industry spillovers are positive from dominant insider firms that are well connected locally, but negative when these insiders are domestically-owned. Foreign-foreign spillovers from non-dominant firms are positive in the competence-creating case.
What determines the location choice of R&D activities by multinational firms?
Research Policy, 2013
We analyse 446 location decisions of R&D activities by multinational firms incorporated in the European Union over 1999-2006. Our results suggest that on average, the location probability of a representative R&D foreign affiliate increased with agglomeration economies from foreign R&D activities, human capital, proximity to centres of research excellence and the research and innovation capacity of the region. Further, our evidence suggests that in comparison to European multinational firms, the effects of patents intensity and proximity to centres of research excellence were stronger in the case of North American multinational firms. While government R&D expenditure intensity increased the probability of location of R&D activities by European multinational firms in the region, it did not have a significant effect on the probability of location of R&D activities by North American multinational firms.
2005
This paper examines how the characteristics of local inter-firm networks affect the location of subsidiary research and development (R&D) facilities. It distinguishes between subsidiary R&D that is competence-creating (creates new lines of technology for the multinational corporate group) and competence-exploiting (adapts established lines of technology). The key dimensions of local networks are the degree of cross-firm concentration or diversity in the relevant industry, and the relative presence of domestically-owned versus foreign-owned firms. The empirical investigation uses patents granted in the US to the world’s largest industrial firms for inventions achieved in their European-located operations, classified by the host European region in which the research facility responsible is locate, over the period 1987-1995. Intra-industry spillovers are positive from dominant insider firms that are well connected locally, but negative when these insiders are domestically-owned. Foreig...
What Determines the Location Choice of Multinational R&D Firms?
We analyse the location decisions of 8,468 foreign affiliates in the Information and Communication Technologies (ICT) sector established in 224 regions in the European Union over the period 1998-2008. Our results suggest that on average, the location probability of foreign affiliates in ICT manufacturing and services increases with market size, market potential, the presence of other foreign-owned firms in the ICT sector, human capital, income tax, and decreases with the corporation tax rate. In addition, in the case of foreign affiliates in ICT services, the innovation intensity in the ICT sector has a positive effect on the location probability. We find that relevant geographical structures for the location decision are different for multinationals with a parent firm in the European Union and the United States.
Global Cities, Connectivity, and the Location Choice of MNC Regional Headquarters
Journal of Management Studies, 2017
One of the manifestations of the increasing diversity in multinational corporation (MNC) operations is the growing importance of regional headquarters (RHQs). RHQs assume an intermediary, bridging role between the corporate headquarters and local affiliates and other actors in their respective regions. They can have a coordination and control (i.e., administrative) mandate as well as an opportunity seeking (i.e., entrepreneurial) mandate. Since these mandates require RHQs to interact with various internal and external entities and exchange knowledge across distant locations, MNCs tend to locate their RHQs in highly connected "global cities" because these places allow the firm to economize on spatial transaction costs. In this paper, we explore the interplay between geographic distance, RHQ roles, and connectivity by analyzing which global city is selected by an MNC when establishing an RHQ. We argue that there is substantial heterogeneity among MNCs in the importance they attach to city connectivitywhich we conceptualize as encompassing the effects of the international flows of people, knowledge, and services-because the connectivity needs of an RHQ varies in relation to its corporate mandate as well as to the geographic configuration of the MNC's activities. Our mixed logit analysis of the location choices for 1,031 newly established RHQs in 48 global cities between 2003 and 2012 provides qualified support for the notion that the relationship between city connectivity and location choice is more pronounced for RHQs with an entrepreneurial role. Although the geographic distance of a city to the MNC's regional affiliates discourages the establishment of RHQs with administrative roles, distance effects disappear when the city is highly connected. Moreover, well connected cities are able to attract MNCs' RHQs from distant countries-of-origin.
Location and the multinational enterprise
Journal of International Business Studies, 2009
In the early development of the international business field, the focus of attention moved from the country level to the firm level, and interest in location issues declined. More recently, firm-based research has itself become increasingly concerned with the study of firm-location interactions. When examining two-way knowledge flows or spillovers between multinational enterprises (MNEs) and other actors in specific locations, the diversity or heterogeneity of firms matters, as does the diversity of locational environments. The localization of knowledge sources depends on MNE group-level strategies for growth and organizational decentralization, on subsidiary-level evolution towards local competence-creating efforts, and on the development of suitable business networks within locations. MNEs now have a greater potential to benefit from a synergistic locational portfolio of complementary sources of knowledge. The locational composition of the international network for knowledge sourcing of a given MNE depends upon the extent of institutional compatibility between the locations in which the MNE is active. This compatibility between locations in turn affects the capacity of the MNE to become an insider in local business systems, and to influence the local institutional environment.
Physical attraction and the geography of knowledge sourcing in multinational enterprises
In this paper, we develop the concept of the degree of Physical Attraction exerted by the dominant firms in a local industry on other actors that increases the ease of local knowledge search for 'insiders' with stronger connections to others. Conversely, the Physical Attraction of dominant firms on other actors raises the difficulty of local knowledge search for 'outsiders' with weaker connections to others. Our theory has important implications for knowledge spillovers. As local industry concentration rises, the likelihood of local knowledge spillovers to outsiders falls, even with a high local knowledge stock. Further, in contrast to the strategic deterrence thesis that posits that technology leaders are deterred from entering clusters for fear of knowledge outflows, our theory implies that with high industrial concentration, it is technology laggards that are deterred, since they do not have the wherewithal to establish the local connections needed to access knowledge inflows. Using a large patent database associated with the UK-based subsidiaries of non-UK MNEs, we find strong support for our theory.
What Determines Location Choice of Multinational R&D Firms?
2010
We analyse 446 location decisions of foreign affiliates in the R&D sector incorporated in the European Union over 1999-2006. Our results suggest that on average, the location probability increases with market potential, agglomeration economies, R&D ...
Multinational Enterprises and the Geographical Clustering of Innovation
Research on the geographic clustering of economic activity dates back to the early twentieth century. It is recognized that in spite of advances in transportation and communications, clustering remains most critical, and is consequently prevalent, in knowledge-intensive fields. Multinational enterprises (MNEs) that increasingly base their value creation and competitive advantage on knowledge-intensive activities are key participants in clusters, affecting both the nature and intertemporal evolution of local innovative activities. However, the role of MNEs in clusters remains under-researched. This paper traces the origins of research on geographic clusters, identifies the seminal contributions focusing on the role of MNEs, discusses potential problems inherent to this area of inquiry and develops an organizing framework for new research.