WP2/05 SEARCH WORKING PAPER Location choices of multinational companies (original) (raw)
Related papers
2013
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.
2013
The paper aims at the analysis of the interrelatedness between formal and informal institutions as a prerequisite of the quality of local institutional environment, which impacts the development of multinational enterprises (MNEs) as well as small and medium size enterprises (SMEs) within a certain economic system. The role of MNEs, their subsidiaries in the host markets and cooperation of the latter with the domestic SMEs, are investigated with regard to the embeddedness of firms within the local institutional system based on the paradigm of a multiscalar approach in a transition economy. The paper empirically analyzes the primary data of the enterprise survey, carried out in Ukraine as one of European Neighborhood Policy (ENP) states. The focus of empirical analysis is centered on the assessment of institutional quality and its regionspecific characteristics by firms, the determination of the differences in local institutional quality perceptions by MNEs and domestic SMEs and iden...
SSRN Electronic Journal, 2000
This paper investigates how the location behaviour of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the 'Old' 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighbourhood Policy (ENP) countries and the Russian Federation. The paper aims to shed new light on the heterogeneity of MNE preferences for the host countries' regulatory settings (including labour market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the randomcoefficient Mixed Logit analysis here applied shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.
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.
Emerging market multinationals in the European Union–A location choice analysis
The European Union (EU) is one of the largest recipients of outward foreign direct investment (OFDI) from emerging economies. We apply a discrete choice model to analyze the location choice of emerging market firms in the EU27. In particular, we test to what extent these firms' location choices are related to agglomeration economies and knowledge externalities because these have been suggested as potential sources for technological catching-up for emerging market firms. Our results indicate that emerging market firms' location choices differ from the choices of other investors. Emerging market firms place, on average, a higher value on urbanization, diversification economies and sector-specific human resources. However, we find evidence for heterogeneity in the location choices of emerging market firms depending on the home region and the sector of investment.
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.
Manuscript type: Research paper. Research aims: This study aims to investigate the impact of institutional distance between home and host countries on the choice of multinational enterprise’s (MNE) entry mode into Vietnam. Design/Methodology/Approach: Transaction cost theory is applied to develop the hypotheses. The data of 82 MNE subsidiaries located in Vietnam were extracted from the World Bank Enterprise Survey. Probit regression is applied to estimate the impact of the institutional distance between home and host countries on the choice of the MNE’s entry mode. Research findings: The empirical results support the hypotheses, revealing that MNEs are more likely to enter Vietnam via acquisition investment rather than greenfield investment. This happens when both the formal and informal institutional distance between Vietnam and the home countries is large. Findings also suggest that the institutional distance between a host country with a transition economy and the home countries is an important element to take into account when MNEs decide to invest in a transition economy that contains high level uncertainties. Theoretical contributions/Originality: The adoption of the transaction cost theory enables this study to conceptualise the framework which is used to empirically test the effect of the institutional distance between Vietnam and home countries on the MNEs’ entry mode decision. This study shows that the transaction cost approach offers insights into how the institutional distance between the host and home countries affect the choice of the MNEs’ entry mode into a transition economy. This study contributes to international business literature by developing theoretical arguments about the role of the national institutional dissimilarities on the choice of the MNEs’ entry mode in a transition economy. Practioner/Policy implications: The implication drawn from this study is that MNEs investing through acquired subsidiaries are less burdened by environmental uncertainties since acquired subsidiaries offer more familarity with the formal institutions. This can help the MNEs to establish a close relationship with the local partners and the government. This also increases the MNEs’ cross-cultural communication and knowledge thereby, enhancing the investment. Research limitations/Implications: Further research should consider more parent firm characteristics so that implications for the MNEs’ entry strategy are developed. Given the role of the different managers at the different levels, future study should capture the perception of these managers who are based at the headquarters so as to further examine the effect of institutional distance. Keywords: Formal Institutional Distance, Informal Institutional Distance, Entry Mode, MNE, Subsidiary, Transition Economy JEL Classification: F23, M16.
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