Geography Reference
In-Depth Information
the MNE and its local environment determines the extent of knowledge
spillovers and locally-embedded innovative linkages.
One of the major contentions of this topic is that in order to understand
the current local linkages evident between multinationals and their local
environments it is necessary to understand the historical evolution of the
local spatial-industrial configuration in which the MNE establishments,
affiliates and subsidiaries operate. Similarly, in order to understand the
current global context in which multinationals invest and locate facilities
in general, it is necessary to understand the evolution of the global eco-
nomic order in which MNEs currently operate.
As we saw in Chapter 6, the modern era of globalization was ushered in
by the global transformations which took place between 1988 and 1994.
This period saw dramatic changes in technology and institutions at a
global scale, which forever changed the global economic context in which
commerce operates. However, globalization was a process which had been
taking place for over 400 years. In contrast, much of the twentieth century
was a period of anti-globalization, and as such it was a period which ran
counter to long-run historical trends, and from which the global economy
emerged in the latter decades of the twentieth century. By observing these
historical patterns it became clear in Chapter 6 that the modern era of
globalization contains some elements in common with previous eras of
globalization, in terms of high degrees of trade and investment openness.
However, the principal distinguishing feature of the modern era of global-
ization is characterized by enormous and rapid movements of knowledge,
and in particular knowledge embodied in multinational firms operating
new production, management, distribution and decision-making systems,
in finance, services, and manufacturing. Global cross-border investment
is nowadays dominated by two-way financial flows between adjacent
rich countries and in particular within services industries. In contrast,
the first three centuries of globalization were dominated by investment
flows from rich countries to distant and poorer regions within an empire
context and primarily these flows were in manufacturing and extraction
sectors. The result is that mergers and acquisitions nowadays dominate
greenfield investments, the dominant mode of FDI in earlier eras of
globalization. As such, FDI and globalization are very much dependent
on international business confidence, and while recent trends may be
partially disrupted in the aftermath of the 2008 global financial crisis, the
opening up of the BRIICS countries will continue to drive globalization
processes.
These issues of the 'fit' between a multinational establishment and
its local environment raised in Chapter 5 have therefore been thrown
into sharp relief by the dramatic changes in the global economic context
