Geography Reference
In-Depth Information
case of the national corporation, Level II and I are split off from Level
III, whereas in the modern MNE, Level I and II become completely sepa-
rated, with the top Level I acting as the corporate brain, responsible for
the firm's overall strategy.
This hierarchy of corporate decision-making is further discussed in
subsequent work, in which the 'law of increasing firm size' is merged
with the 'law of uneven development' (Pitelis 1991, 2005). In particular,
Hymer (1972) suggests a 'correspondence principle', that is the existence
of a direct relationship between the centralization of power and control
within the MNE and the centralization of power and control in the world
economy. The 'correspondence principle' thereby highlights the cor-
relation between corporate growth and evolution, on the one hand, and
uneven development across different parts of the world, on the other.
5
It
is here, in the 'correspondence principle', where the critical connection
between the MNE's ownership advantages and its strategic behaviour,
and its spatial location and economic geography lies.
Hymer suggests that by applying the location theory to the Chandler-
Redlich model, the 'spatial dimension of the corporate hierarchy' could
be effectively analysed (Hymer 1972, p.122). According to Hymer, the
pyramidal structure of corporate control centralization translates directly
into a
hierarchical structure of geographical locations
. Some of these loca-
tions are heavily dependent on others and it is this dependence relation
which underlies the uneven spatial structure of economic development.
Therefore, Level III activities will tend to be relatively evenly spread and
distributed world-wide, according to the attractiveness of resources such
as labour, markets and raw materials. It is this phenomenon which dif-
fuses industrialization across less advanced economies. In contrast, Level
II activities will tend to be concentrated in large cities, as they require pri-
marily white-collar labour, as well as sufficient communication and infor-
mation systems. At this level, MNEs from different industries will locate
in the same cities, thereby giving rise to a strong spatial and functional
concentration at the sub-national level, far stronger than that of Level
III. According to the Hymer schema, Level I activities will be even more
geographically clustered than those of Level II, as they need to be close to
sufficient supplies of highly specialized services, capital markets, media
and governments. The provision and exploitation of these high profile
service relationships require high levels of connectivity, both locally and
with the rest of the world. Hence, according to Hymer, the highest level
functions of the leading MNEs will almost all be located in the world's
major
global cities
, which themselves will be 'surrounded by regional sub-
capitals' (Hymer 1970a, p. 446). Hymer (1972, p. 124) argues that, eventu-
ally, the major global cities which will be the home to the core headquarter
