Geography Reference
In-Depth Information
London, or Hong Kong becomes more important than ever. Rather than
becoming flatter, in many aspects globalization is nowadays making the
world more uneven, more curved (McCann 2008), or more spiky (Florida
2005a, b; Rodríguez-Pose and Crescenzi 2008). In formal economics, as
discussed later, these changes are represented by the increasing returns
models of the new trade theory and the new economic geography (see, for
all, Krugman 1991a, b; Fujita, Krugman and Venables 1999).
In the organizational dimension, it is true that networks have grown,
as the reduction of transactions costs has made it possible for companies
to outsource many functions. Yet, innovation and flexibility can thrive
under administrative guidance just as mass production did. Rumours of
the death of the large corporation have been greatly exaggerated (Piore
1994a, b).
Another problem with the picture of flat global networks is that flat-
ness and global reach are often in conflict. The global reach of production
networks is to a substantial extent an administrative accomplishment: dis-
tance has been shrunk not only by improved technology, but also by cor-
porate organization. Managerial hierarchies and standardized procedures
are, among their other functions, distance-spanning devices. Conversely,
the most robust and innovative
flat
networks are disproportionately local.
One role played by large MNEs is to link such local clusters and networks
to the larger world, extending them beyond national boundaries (Amin
and Thrift 1992; Enright 2000). This is an increasingly important role, as
we will see, because the reductions of transactions, communication and
transportation costs, where they are evident, are not accessible everywhere
and to any firm, while they are relatively readily accessible to large MNEs.
1.2.2
Evolving Dinosaurs and the 'Natural' Selection of Geography
The multinational enterprise can be broadly defined as a multiplant,
multi-activity firm that engages in the foreign production of goods and
services, as well as in a variety of other businesses carried out across
national borders.
1
In so far as MNEs own and control their cross-border
activities, the explanations of the determinants and motivations of multi-
national behaviour have to take into account ownership, control, organi-
zation and the location of such operations (Dunning 1993). The first three
aspects, namely ownership, control and organization, were almost entirely
ignored in the economic theory of the first half of the twentieth century,
which had largely assumed that factors of production were brought
together by perfect and costless market mechanisms. At the same time,
the geographical patterns of multinational activity were broadly and indi-
rectly addressed by classical and neoclassical theories of the international
