Geography Reference
In-Depth Information
that this top-down approach to local economic development needs to be
treated with some caution, because the 'promotion' of industrial districts
and clusters for attracting foreign investors has often produced rather
limited outcomes, over a period of now more than two decades, and
thereby to some extent replicating the aspatial view of growth and develop-
ment mechanisms. If we start to take geography and space seriously, then
it becomes very clear that the extent to which local economic growth and
development may be spurred by MNEs in 'particular' activities and loca-
tions can be determined only by assuming space as an endogenous variable
whose L features combine explicitly with both O and I advantages.
2.7
THE ECONOMIC GEOGRAPHY OF
MULTINATIONALS: SEARCHING FOR A
STRONG L
2.7.1
The Theory of MNE and the Problematic L
For more than three decades now the eclectic OLI paradigm has provided
the principal analytical framework for examining both the growth of mul-
tinational activity and its changing patterns over time. In spite of the criti-
cisms that the OLI has encountered regarding its explanatory power, it has
consistently been demonstrated that the OLI approach is in many ways
still more than suitable as a tool for interpreting the complexity of multi-
national expansion, and particularly in a historical context (e.g., Dunning
1995, 2001), than any other overall schema. That this is so is clear from
the extensive array of counter-arguments to such criticisms which the OLI
paradigm offers (Cantwell and Narula 2001).
In contrast, however, the OLI paradigm's ability to effectively integrate
both micro and macro perspectives does not translate well when we are
looking at the issue of location. The reason for this failure does not reside
only in the OLI itself, but also in the theories that underpin it.
The theory of the MNE has developed along the lines of a sharp distinc-
tion between firms, as organizations subject to centralized control, and
markets, treated as environments characterized by independent actors
engaged in full arm's length transactions. Although both of these lines
have deeply evolved over time and remain theoretically valid and useful in
today's analysis of firms and markets, they also still represent the major
constraints to the full integration of a spatial dimension within the study
of MNE operations.
Although strongly micro-founded, both traditional economic theory,
with its focus on international production and product or market dichoto-
