Geography Reference
In-Depth Information
8.
Multinationals, emerging economies
and the changing economic
geography
8.1 INTRODUCTION
As we have already seen in Chapter 6, in the current phase of globalization
the importance of the role played by trade blocs and areas of integration
in the world economy has increased. At the same time, the importance of
multinationals has increased (Rugman 2000, 2005). For example, if we
take the case of the three super-regions of US, EU and East Asia, we find
that the average same-region sales share of the world's top 500 MNEs is
over 70 per cent (Rugman 2005). Moreover, as discussed in Chapters 4 and
5, MNEs play a crucial role in facilitating knowledge flows across space,
and this is particularly evident within super-regions. However, along with
FDI flows, the overwhelming dominance of developed economies in global
R&D effort is still very marked. Of the 2600 foreign affiliates in the global
economy whose primary role is R&D, almost 70 per cent are still located
within the triad of US, EU and Japan (UNCTAD 2005). In terms of global
shares, the geographical origins of global R&D reflect almost exactly the
geographical origins of FDI outflows and, if anything, they are slightly
even more skewed in favour of most developed macro-regional blocks.
As such, developed economies not only dominate global output, global
R&D and global trade, but also are dominated by the trading relation-
ships of the MNEs located in the same region. Why is this the case? From
the arguments in the previous chapters this is related mainly to the ability
of the multinational firm to access key knowledge sources and assets in
the local economy of origin, as well as from other locations in the global
economy. Indeed, evidence from patent citation data suggests that firms
typically learn 80 per cent of their knowledge within the local region and
89 per cent within the same country (Peri 2005). Location in knowledge
centres is therefore critical for high value activities, and the arguments
in Chapters 3 to 5 imply that this spatial knowledge concentration will
be even stronger for service industries dependent on trust relations and
interpersonal networks.
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