Integrating Business and Location: An Overview of Two Theoretical Frameworks on Multinational Firms (original) (raw)

Location and the Multinational Enterprise: A Neglected Factor?

Journal of International Business Studies, 1998

w o r l d e c o n o m i c scenario for international business over the past two decades, a n d then goes on to examine its implications for the location of foreign direct investment and multinational enterprise activity. It suggests that many of the explanations of the 1970s a n d early 1980s need to be modified a

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.

The location behavior of the multinational enterprise: Some analytical issues

In the international business literature location behavior has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the nature, role, and behavior of multinational enterprise (MNE). In this paper it is argued that this approach is now no longer appropriate for discussing the spatial behavior of MNEs, because of the fundamental changes which have taken place either in MNE organization or in the global and institutional environment for foreign direct investment (FDI). At the same time, the paper argues that current location theory from regional economics and economic geography is also largely unsuitable for discussing these issues, such that the spatial behavior of the MNE provides a set of difficult challenges to location analysts. There appears to have been some response to these issues from the international business and management literature, most notably the Porter literature on clusters. However, it is also argued here that this literature provides few, if any, real answers to the problems set by the geographical behavior of the MNE. It is concluded that a fusion of traditional economic geography approaches with a focus on the information and organizational aspects of the firm and the region under consideration may be a way forward for both theory and empirical analysis.

Analytical differences in the economics of geography: The case of the multinational firm

In this paper we argue that the various discussions of the regional location behaviour of the multinational firm by the different fields of analysis which deal with these issues are all rather at a tangent to each other. Only economic geography and regional economics discuss firm-location behaviour at the subnational regional level, whereas international trade theory and traditional international business analysis focus only on firm locations at the level of a country. Where subnational regional locations have recently been discussed in international business analysis, this has been done primarily by incorporating the Porter ‘clusters’ literature. However, by adopting a transactions-costs approach, we show that such a ‘clusters’ concept is unable to distinguish between whether a multinational enterprise should or should not locate in a particular region. In addition, we use this approach to point to directions of research fruitful for reconciling these various different traditions of location analysis.

The Geography of Multinational Firms

Economics of science, technology and innovation, 1998

Braunerhjelm, Pontus. The geography of multinational firms / edited by Pontus Braunerhjelm and Karolina Ekholm. p. cm.-(Economics of science, technology, and innovation ; v. 12) Includes bibliographical references and index.

WP2/05 SEARCH WORKING PAPER Location choices of multinational companies

This paper explains the location choices of multinational companies (MNCs) in a transition economy by institutional quality, proximity, and traditional economic factors. Based on a thorough theoretical framework the paper contributes to the literature on MNCs and location choices by introducing an analysis of institutional determinants at the regional level within a transition economy perspective which has not gained sufficient attention in existing research. The paper also introduces a set of hypotheses for testing empirically the location choices of MNCs in Ukraine on the basis of the results of the enterprise survey held in the three regions of Ukraine.

A regional solution to the strategy and structure of multinationals

European Management Journal, 2008

The transnational solution developed by Bartlett and Ghoshal is shown to be suitable for only a few special cases of multinational enterprise multinational enterprise (MNE) strategy and structure. As MNEs have most of their assets and sales within their home region, they are in need of regional, not transnational strategy and structure. Here we provide data on the regional dimension of assets and sales of the world's largest 500 multinationals. We explore how the empirical reality of a regional concentration of assets and sales imposes a regional solution, rather than the transnational solution.

The Locational Determinants of the US Multinationals Activities

2004

This paper examines empirically a range of theoretical hypotheses about the determinants of FDI location in a panel data regression framework. The results of the estimation of a gravity model lend support to the proximity-concentration and internalisation hypotheses. Also, the fact that FDI has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the share version of the gravity model over its classical formulation. A panel data cointegration-type analysis between FDI and GDP, and per capita income differential suggests that GDP has a positive impact on FDI, but provide mixed evidence as to whether per capita income differential reflects demand or supply determinants of FDI. Causality tests between income, income differential and FDI points to FDI playing a positive role on economic growth and convergence.

Spatial Decisions of Multinational Enterprises and their Effect on Local Firms

Since the 1980s empirical research has been conducted on the influence of MNEs on local firms. The spillovers predicted by growth theory models used in the research designs have not been found. The main result is the importance of increased competition for the productivity of local firms. When FDI flows expanded rapidly in the 1990s, it became clear that MNEs play an important role in international technology transfer. However, growth theory models are limited in that market structures and firms cannot be modeled explicitly. The New Economic Geography (NEG) is better equipped to handle these issues. Instead of spillovers it relies on linkages. Therefore, new insights might be gained by basing empirical research on a NEG model and looking for linkages among firms. *