Geography Reference
In-Depth Information
Hymer's thinking later develops through different stages in various
directions, such as the growth of the firm, the internal integration of the
firm, and the transactions costs faced by the firm (Hymer 1968, 1970a),
and his thinking is particularly influenced by the seminal article
The
Nature of the Firm
written by Ronald Coase (1937).
4
In the first Hymer (1960) argument, the focus of the analysis is on the
investor's control afforded by a common ownership and organizational
system, which ensures the exploitation of advantages. The analytical
approach makes no serious attempt to explain the geographical spread of
production across many sites. However, a relevant implication for loca-
tion is found in Hymer's pioneering recognition that foreign direct invest-
ment tends to be concentrated in certain industries across countries, rather
than in specific countries across industries. In his 1968 article, which is
considered by many to be path-breaking for its anticipation of the inter-
nalization and transactions costs approaches to the existence and growth
of MNEs, Hymer links more explicitly his ideas on control with geogra-
phy by suggesting that different segmented geographical markets can be
treated as 'spheres of influence'.
Drawing both on the historical account given by Alfred Chandler on
the evolution and surge of 'big business' in nineteenth and early twentieth
century American industry (Chandler 1959, 1962), and also on the 'crea-
tive destruction' arguments of Josef Schumpeter (1934), Hymer formu-
lates his 'law of increasing firm size' (Hymer 1970a). He observes three
main stages of corporate evolution: from the competitive Marshallian
firm, with a single function, industry and ownership, to the large national
oligopolistic corporation, vertically integrated with dispersed ownership,
to the modern conglomerate enterprise, multidivisional with cross-country
located affiliates all coordinated by a centralized 'corporate brain' (Hymer
1970a, p.442). Rehearsing Chandler and his co-author Fritz Redlich
(1962), Hymer explains that during the evolutionary process of the firm
towards the worldwide enterprise - the modern MNE - a pyramidal struc-
ture of three levels of business administration and decision-making could
be detected. Level III, the lowest and widest level, is the level dealing with
ordinary daily operations which are connected to production activities.
Level II, which is the intermediate level, is generated by the separation of
the head office functions from the field offices of the firm, and it controls
Level III as well as coordinating the management at that lower level. The
highest is Level I, the top level of management, which is responsible for the
setting of the goals and strategies for the whole firm. The multinational
firm is therefore rather different from other concepts of the firm. In the
representative Marshallian type of firm typical in economic theory all
three levels are embodied in the owner-entrepreneur. In contrast, in the
