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.
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. *
Globalisation, economic geography and the strategy of multinational enterprises
Journal of International Business Studies, 2004
The intention of this paper is to review the literature linking ownership and location strategies to economic geography and theories of globalisation and to explore new areas of research. This paper examines globalisation in terms of conflicts between markets and economic management, and suggests that the differential pace of globalisation across markets presents a number of challenges to policy makers in local, national and regional governments, and in international institutions. In examining the changing location and ownership strategies of MNEs, it shows that the increasingly sophisticated decision making of managers in MNEs is slicing the activities of firms more finely and in finding optimum locations for each closely defined activity, they are deepening the international division of labour. Ownership strategies, too, are becoming increasingly complex, leading to a control matrix that runs from wholly owned units via FDI through market relationships such as subcontracting, including joint ventures as options on subsequent decisions in a dynamic pattern. The input of lessons from economic geography is thus becoming more important in understanding the key developments in international business. The consequences of the globalisation of production and consumption represent political challenges, and reaction against these changes has led to a questioning of the effects of global capitalism as well as to its moral basis. These four issues are closely intertwined and present a formidable research agenda to which the international business research community is uniquely fitted to respond.
Global Strategy Journal, 2015
In this study, we argue that when undertaking location decisions, multinational enterprises (MNEs) ought to incorporate their competitors' reactions to such decisions as well as consumer preferences for location, in addition to the more standard cost-benefit analyses. We view MNEs as networks of activities connected via product and knowledge flows and develop a game-theoretic, location-allocation mathematical model. A series of computational analyses leads to competitive outcomes and location choices, where even without an explicit modeling of inter-region differences, MNEs show strong tendency toward regionally focused location configurations. Importantly, such regionally focused location configurations can take the shape of regionally focused MNEs or of globally dispersed MNEs with regional structures. Copyright The results are sensitive to the sequential order in which MNEs enter the game and, hence, there are up to six possible solutions for three players and up to two solutions for two players.
Regional Headquarters of Multinational Corporations: Literature Review and Taxonomy
As part of the business globalization phenomena, executives are called upon, more frequently than before, to consider regionally-focused organizational structures, such as regional headquarters, and to determine their location. However, academic literature, as of now, has not placed much emphasis on the subject of regional headquarters and their study has only recently become an emerging area of interest in the field of international business. This paper presents a taxonomy and analysis of literature regarding regional headquarters of multinational corporations, with the purpose of identifying limitations of current literature, as a basis for future research. Regional headquarters (RHQs) of multinational corporations (MNCs) are separate and independent subsidiaries, located in different geographical regions than the corporate headquarters, which have decision-making authority and power over other subsidiaries in their respective regions. This definition is based on a fairly wide con...
Globalization and location choice: an analysis of US multinational firms in 1980 and 2000
Journal of International Business Studies, 2007
In this paper we examine foreign location choices of the top 100 US multinational corporations (MNCs) in 1980 and 2000. We first ask whether there has been a change in MNC foreign location choice in this two-decade period. Second, we explore the underlying reasons of location change by focusing on country-level factors, accounting for firm-, industry-and regionallevel explanations. Our findings suggest, first, that the extent of MNCs' activities around the globe is more extensive than assumed by regionalists' arguments and well beyond Ohmae's TRIAD, but still less widespread than claimed by the globalists -the two main traditions within the globalizationregionalization debate. Second, we uncover an interesting de-location pattern in this period. Third, we develop an integrative framework where both economic and institutional-cultural arguments are shown to influence MNCs' foreign location choice in different ways. We conclude with a discussion of our findings, and provide suggestions for future research.
Global cities and multinational enterprise location strategy
Journal of International Business Studies, 2013
We combine the concept of location derived by economic geographers with theories of the multinational enterprise (MNE) and the liability of foreignness developed by international business scholars, to examine the factors that propel MNEs toward, or away from, "global cities". We argue that three distinctive characteristics of global cities -global interconnectedness, cosmopolitanism, and abundance of advanced producer services -help MNEs overcome the costs of doing business abroad, and we identify the contingencies under which these characteristics combine with firm attributes to exert their strongest influence. Consistent with these arguments, our analysis of a large sample of MNE location decisions using a multilevel multinomial model suggests not only that MNEs have a strong propensity to locate within global cities, but also that these choices are associated with a nuanced interplay of firm-and subsidiary-level factors, including investment motives, proprietary capabilities, and business strategy. Our study provides important insights for international business scholars by shedding new light on MNE location choices and also contributes to our understanding of economic geography by examining the heterogeneous strategies and capabilities of MNEs -the primary agents of economic globalization -that shape the nature of global cities.
Place, space and organization— economic geography and the multinational enterprise
This article discusses the current links between international trade theory, economic geography and strategy and international business. We offer a way forward for building further links between these literatures that focusses on the notions of place, space and organization, and we document how the papers in this special issue contribute to this debate.