Geography Reference
In-Depth Information
nants of foreign and local firms' behaviour are reduced to mainly labour
cost differences, thereby largely ignoring the firm's internal and external
relationships and its spatial economic environment. This 'ambiguous
enterprise context' (Taylor 1987, p. 82) does not allow us to distinguish
between global and local competition; nor does it shed light on the intra-
firm versus inter-firm relationships which are crucial to identify a specific
spatial dimension of both industry and technological cycles.
Yet, although the product cycle model has been given a space-specific
characterization by authors who have followed Vernon's own extensive
work on location and urban and regional economics (e.g., Vernon 1957,
1959, 1960, 1966, 1991a), such aspects have been surprisingly overlooked
in the international trade and business literature. In fact, in spite of
Vernon's path-breaking analysis of the causes of the urban concentration
and then the geographical spread of multiplant activities which takes place
across boundaries of product lines, the subsequent Vernon-inspired litera-
ture in international business still tended to treat MNE location behav-
iour using the highly unspecific geographical dichotomy between skilled
capital-abundant advanced countries and unskilled labour-abundant
developing economies. In terms of economic geography the Vernon tra-
dition therefore largely fails to move beyond the typical insights of the
Heckscher-Ohlin neoclassical model, relying on its implicit assumptions of
catching up effects through technology diffusion and imitation.
7
Vernon's
emphasis on the spatial shifts involved in industry development cycles, and
the changing relevance of external economies during such cycles, should
have called for an explicit incorporation of locational issues in the expla-
nation of MNEs operations. This, however, is still largely missing in the
international business literature. Meanwhile, on the other hand, a rigor-
ous examination of ownership and organizational issues is largely absent
in regional and urban economics.
The major criticisms of the PLC-based explanations of international
production, at least as related to the geographical dimension, can thus be
split into two themes.
8
On the one hand, on the basis of the evolution of
the contemporary world economic environment, ownership advantages
are to be attributed to firms, rather than countries, thus making the
geo-
graphical origin
of MNEs much less predetermined by the national level.
This point, which was seemingly captured in Vernon's original framework,
has been highlighted by both regional economics (e.g., Taylor 1986, 1987)
and international business (e.g., Cantwell 1995) scholars who attribute
the limitations of the PLC model to an inadequate conceptualization of
both the firm and technological progress. On the other hand, observa-
tion suggests that agglomeration forces have attracted MNE activities to
particular locations in both advanced as well as emerging economies, thus
