Geography Reference
In-Depth Information
ices and their multinational customers. Through such contacts, local sup-
pliers obtain technical assistance, incentives to improve product quality
and/or cost reductions, and opportunities to reap economies of scale
and scope. The second mechanism is via imitation and adaptation; local
firms may replicate and adapt to their environment innovations of either
a technological and organizational nature, generated by the presence of
foreign firms. The third mechanism triggering positive effects is repre-
sented by skills upgrading and human capital formation, ranging from
basic learning-by-doing and learning-by-using to formalized advanced
technical training courses (see Dunning, 1993; Hobday 1995; Radosevic
1999a, b; Padilla-Perez 2006). Importantly, the learning processes implied
by all three mechanisms occur via both informal connections and formal
collaboration.
However, although MNEs undoubtedly play a central role in develop-
ment paths, as we will see more in detail in Chapter 5, learning and capa-
bilities building processes - and therefore the impact of MNEs on host
economies - are strongly dependent on the characteristics of local actors
and environments. These in turn are highly diversified within national
boundaries of developed countries and even more so in developing econo-
mies. Thus, the IDP hypothesis has missed one key aspect of the evolving
configuration of the OLI advantages during the development trajectory of
the host economy; namely, that it is particularly the L that triggers such
a change.
Indeed, Dunning and Pitelis (2008, p.171) remark that 'Hymer's law
of uneven development follows only under his very specific assumptions
and assertions, namely the dominance of MNEs, the absence of learning
by nation-states in developing countries, and the lack of 'nationalism' on
their part. Certainly, in today's economic and political scenario these are
questionable assumptions.' Yet, it can be argued that in the current phase
of globalization, Hymer's basic assumptions actually hold very strongly if
a detailed and explicitly spatial perspective is applied to the argument. The
Dunning and Pitelis's remark above represents a fundamentally aspatial
interpretation of the role that MNEs can play in regional and local devel-
opment. However, they also contend that 'Hymer also paid little attention
to the ways in which capitalist governments might facilitate the positive
externalities of inward FDI. One example is the promotion of 'indus-
trial districts' and 'clusters'. As documented inter alia by Porter (1990)
and Enright (2000, 2003), agglomerations of interlinked firms, including
MNEs that compete and cooperate in a particular activity in a particular
location are frequently a potent source of locally based economic develop-
ment, and a magnet for FDI' (Dunning and Pitelis, 2008, p. 173).
What we argue here, and will also be further clarified in Chapter 5, is
