Geography Reference
In-Depth Information
allocation of resources and endowments. Indeed, the international geo-
graphical distribution of factor endowments was, and in some respects still
is, assumed to be a major determinant of cross-border flows in both old
and new theories of international trade and production.
During the decades immediately after the Second World War, MNEs
were operating within the Bretton-Woods system of largely closed econo-
mies in which currency parities were fixed. Within this framework, neo-
classical explanations of trade without any role for geography naturally
flourished. The resulting theories of international business and multina-
tional enterprise which emerged as a hybrid agenda largely from Vernon's
(1966) product cycle model (and later encompassed in John Dunning's
OLI eclectic paradigm, which, as we will see, plays a paramount role in
our attempts at providing the theoretical building blocks for interpreting
the relationship between MNEs and space) were, not surprisingly, based
almost entirely on the nature, organization, objectives and behaviour of
mid-twentieth century US manufacturing firms, the dominant form and
mode of multinational organization. However, this particular institu-
tional system and its associated analytical framework, started to break
down following a series of events that began with the Eurodollar waves of
migration of US merchant banks into London in the 1960s and then con-
tinuously on through the late 1970s and early 1980s, and was maintained
with the rise of the Japanese and East Asian manufacturing MNEs in the
1980s. These modes of multinational activity were quite different from the
received frameworks, either because of sectoral differences (services versus
manufacturing), because of different organizational behaviour and pro-
duction philosophies (Just-in-Time JIT and Total Quality Management
TQM), or because of the different and wider arrays of functions included
in multinational expansion.
Since the 1960s, issues other than factor endowments therefore became
increasingly important to international trade and industrial economists,
most notably, market structures, economies of scale, knowledge and tech-
nology. However, in geographical terms, as these new elements were pro-
gressively incorporated into a variety of theoretical approaches devoting
attention to the MNE, they were treated along the lines of the unspecified
macro-geography inherited from the international trade theory. By and
large, in this schema, the competitive advantages of firms coincide with
those of the country of origin, and the attraction forces pulling MNE
operations were those of the country of destination. National and even
supranational geographies have been the obvious level of analysis when
considering both the determinants and effects of MNE activity. Cities,
sub-national regions and differentiation
within
nation states were largely
absent.
