Geography Reference
In-Depth Information
tiplant domestic enterprises (MPDEs) as well as multinational enterprises
(MNEs). In particular, these models underline the critical importance
of both knowledge and transactions costs in determining the locational
behaviour of these firms.
The orthodox firm location models discussed in Chapter 3 also high-
light the fact that the MNE is simply a special case of the MPDE, and
many aspects of the locational analysis of both MNEs and MPDEs there-
fore share common elements. However, to the extent that the MNE is a
special case of the MPDE, it is special in the sense that the variety and
magnitude of knowledge sources that MNEs access and the variety of
transactions costs challenges that MNEs must overcome, are very much
greater for MNEs than for MPDEs. However, it is not simply a matter of
scale and magnitude. As we saw in Chapter 4, the much greater complexity
of the environment in which MNEs operate means that there are funda-
mental differences between MPDEs and MNEs, the differences of which
centre on the importance of issues of knowledge generation, knowledge
acquisition, knowledge transfer, capabilities, learning and innovation. The
innovation systems literatures discussed in Chapter 4 emphasizes that the
linkages between a firm and its environment are central to the modern eco-
nomics of technological change and evolutionary views, and early location
theory also builds on these arguments. However, the way in which these
arguments must be applied in order to analyse the geography of MNEs is
very much more sophisticated than the ways in which the arguments can
be applied to understanding the geography of MPDEs.
On the basis of all of the foregoing arguments Chapter 5 offered a
framework for positioning MNEs within the context of economic geo-
graphy by means of a knowledge-transactions costs taxonomy of different
types of spatial-industrial structures and geographies. This allows us to
identify the key linkages operating between particular types of firms and
particular types of regions, and to distinguish between which types of
regional structural conditions will be favourable to which types of MNE
firms. We argue here that this approach provides much richer insights
than dichotomous models based on distinctions between horizontal inte-
gration versus vertical integration, home country versus foreign country,
or concentration versus dispersion. This taxonometric approach demon-
strates that multiple types of firm-cluster interactions are discernible, all
of which can involve multinational investment, and all of which can evolve
in various ways. The crucial issue which the taxonomy uncovers is that
the extent to which the rationale and characteristics of the MNE 'fit' with
those of the local economy is critical for understanding the relationship
between location and innovation. What becomes evident is that the degree
of 'fit' between the knowledge and transactions costs characteristics of
