Geography Reference
In-Depth Information
relations between the firms are built upon longstanding mutual trust and
shared experience, an immigrant oligopoly MNE firm will benefit little
from such features, as these trust systems are generally based on networks
of small firms aiming to collaborate together.
On the basis of these arguments, if we apply Akerlof's (1970) market-
for-lemons model, many industrial clusters and regions which include
large oligopolistic competitors will generally be characterized by adverse
selection and should either fail to form, or become concentrations of
mediocrity (McCann and Mudambi 2004, 2005; Mariotti et al. 2010).
This will be particularly so in the case of clusters which are characterized
by the types of inter-firm relations typical of pure agglomeration or the
social network. The reason for this is that the knowledge and information
internalization logic in favour of the MNE is largely inconsistent with
either the externality argument in favour of the pure agglomeration or the
interpersonal and inter-organizational relations argument of the social
network. Similarly, the clear organizational boundaries of the large firms
typical of an oligopoly are inconsistent with the organizational forms
assumed by either pure agglomeration or social networks.
These arguments therefore provide a powerful counter-argument to the
simple clustering logic and appear to explain the empirical observation
that many of the largest firms - either MPDEs or MNEs - do
not
co-locate
their knowledge creation activities with those of their competitive rivals
(Simmie 1998; Cantwell and Santangelo 1999; Shaver and Flyer 2000;
Alcácer 2006; Verbeke et al. 2009). Moreover, in situations where they
do so, the organizational aspects of the firms are designed specifically to
avoid the sharing of knowledge (McCann 1993; Arita and McCann 2002).
The one major clustered form of industrial organization which is almost
entirely consistent with the strategies and objectives of oligopolistic MNEs
is that of the industrial complex. In some situations, inward investing
MNE firms will find it optimal to locate facilities close to other similar
firms, specifically in order to carry out particular types of long-term inter-
firm transactions. In these cases, the intentional sharing of knowledge
and information between the firms is a mutually planned process with
knowledge inflows and outflows being carefully managed within a system
of bilateral monopoly frameworks. This type of clustering is commonly
observed in industries such as chemicals, pharmaceutics, petroleum, auto-
mobile manufacturing, as well as many sectors of the electronics industry
(McCann 1997). Yet, the inter-firm relations embedded within this type of
system are entirely different to the types of relations assumed to operate
in the clusters models based on simple descriptions of knowledge spillo-
vers. As such, observations of MNE clustering of a type consistent with
an industrial complex model may often be misinterpreted as a cluster
