Geography Reference
In-Depth Information
and Thrift 1997; Coleman 1996), whose firm and industry characteristics
are largely unsuitable for modelling by orthodox microeconomic location
theory. However, even allowing for these complexities we are still able to
use the types of location theory principles outlined in the previous sections
along with the organizational and information arguments raised by the
behavioural critique, in order at least to begin to explore these issues.
As already said, multinational firms are by definition multiplant firms,
in that multinationality means that such firms must have facilities in more
than one country and thereby in more than one location. Indeed, the
spatial arrangement whereby a firm has multiple input sources, multiple
output market locations, and multiple production sites, is very much the
norm for multinational firms. However, how we arrive at this observed
outcome is itself important, in that firms rarely make a one-shot decision
to site multiple facilities in different locations.
As we have already seen, some firm location decisions are indeed one-
shot single establishment decisions and, as such, can be characterized
very simply in term of the Weber model. In addition, there will also be
cases where firms also make a one-shot decision to site several facilities in
different locations. However, a key feature of the Weber, Hotelling and
Salop models is also that they allow us to understand the factor price and
market conditions under which other locations will become more attrac-
tive as locations for investment. These models also allow us to see location
decisions in terms of a dynamic process, in which changes in factor cost or
market competition conditions can engender changes in location behav-
iour, which themselves can change the supply linkages between suppliers,
firms and markets. In other words, rather than simply assuming that all
location decisions are one-shot single establishment location choices, if
we assume that there is a certain element of 'stickiness' involved, they can
be seen as being inherently incremental in nature as firms respond to new
input and output conditions by changing their locations, and consequently
the geography of their input and output linkages.
As we mentioned in Chapter 2, one of the frequently observed aspects of
MNE locational behaviour is that MNEs tend to search for an initial over-
seas investment site, and then over time they search for either new or addi-
tional investment locations. This incremental process is often described
in terms of the stage theory of the evolution of the firm (Johansson and
Vahlne 1977), the stage theory of the evolution of the product (Vernon
1966) or issues related to market barriers to entry (Caves 1971, 1982).
Each of these various approaches suggests that the process of interna-
tionalization tends to occur by firms setting up a new overseas investment
'platform', whereby an initial overseas facility is set up (Caves 1982a). This
platform establishment then acts as a prototype overseas venture which,
