Geography Reference
In-Depth Information
FDI. It is imperative to identify which types of regional structural condi-
tions will be favourable to which types of MNE firms. We have seen that
even within the Behrman-Dunning classification, further distinctions of
MNE types are envisaged, and that contemporary MNEs may belong
to more than one or even all types simultaneously. Today's MNEs are
seeking markets, efficiency, as well as general, specific and strategic assets
at once, and they utilize a range of modes of ownership, coordination and
control that goes well beyond that of simply FDI. Techniques such as
mergers and acquisitions (M&As); foreign investment in R&D; contract
manufacturing; outsourcing and offshoring; franchising; licensing; and
management contracts, among others (UNCTAD 2011) represent the
arsenal of options available to modern MNEs.
The good 'fit' between firms and geography across as many of these
options as possible, therefore, will help foster the development of inno-
vative networks, and will help to promote the mutually beneficial local
'embeddedness' of MNEs (Iammarino et al. 2008; Kramer et al. 2011).
In contrast, in the absence of any consideration of the knowledge base,
technology and transactional aspects of both the firms and their spatial
systems, it becomes extremely difficult for policy initiatives to help to
engender any strong link between the MNEs and their local environment.
In such situations, as we have also shown in this topic, MNEs are far more
likely to develop either as largely standalone operations with little or no
local innovative linkages, or in the most extreme cases, as 'islands of inno-
vation' (Simmie 1997).
Complementarity and relatedness between old and new knowledge and
between local and extra-local capabilities and linkages between the align-
ment of institutional objectives and networks, and between openness and
external integration, are all necessary conditions for ensuring a 'diversity
for growth' (Jacobs 1961, p. 194) in regional systems, industrial clusters
and city-regions. The balance between internal and external sources of
innovation, and between the degree of closure versus openness of firm
and regional innovation features, are a major explanation underlying the
increasing intra- and interregional diversity and the formation of new
regional hierarchies, leading to 'more similar but less equal' (Paci 1997)
patterns of regional evolution. The acknowledgement and evaluation
of diversity in firm and geographical space is most likely to improve the
fairly modest achievement of traditional local economic development
policies still firmly grounded on the maximization of FDI-inflows-no-
matter-what. Employing the classification schemes proposed in this topic
as a blueprint for identifying the potential sources of innovation in each
particular locality may be a step forward for designing policy responses
which are able to better foster local MNE engagement and thereby spur
