Geography Reference
In-Depth Information
ing of the internal behaviour and organization of firms, the I advantages
(the
how multinational?
), have relied on both internalization theories
and on managerial and sociological perspectives. Theories of market
power (Hymer 1960), macroeconomic models of international produc-
tion (Vernon 1966), imperfect competition and international investment
(Horstman and Markusen 1987a), transactions costs approach (Buckley
and Casson 1976; Rugman 1981; Hennart 2000), resource and competence
based views of the firm, as well as evolutionary theories of technological
change (Cantwell 1989; Kogut and Zander 1993), have all contributed to
our understanding of the nature of O advantages, and have also helped to
explain its growing connections and interactions with the I.
While acknowledging the success of the eclectic OLI paradigm in stand-
ing the test of time, a major shortcoming has been, and still is, observable
in its fundamentally weak conception of the L. The L has always consti-
tuted the Achilles' heel of the OLI, both in terms of its initial formulation
and also in terms of its subsequent adaptations which gave rise to the
resulting major theoretical explanations of multinationality.
Later on in Chapter 5 it will be seen that a transactions costs analysis
of the firm, combined with an evolutionary view of technological change
and regional industrial structures, provides a novel and systematic way of
integrating international business insights with the economic geography
literature on firm location behaviour, clusters, innovation and knowledge
spillovers. This will then allow us to tease out the key linkages between
particular firms and particular types of regions, and to distinguish between
which types of regional structural conditions will be favourable to which
types of MNE firms. Above all, the variety of potential outcomes in mul-
tinational location choices is seen to be much broader than the tensions
between HFDI and VFDI or between concentration versus dispersion.
Multiple types of firm-cluster interactions are discernable, all of which can
involve multinational investment.
However, before we can reach these conclusions, it is necessary to
first investigate the major theoretical insights associated with firm loca-
tion behaviour in general. If the focus is indeed to be on actual location
behaviour, one important clarification has to be made with respect
to multiplant domestic enterprises (MPDEs). Indeed, as with MNEs,
MPDEs carry out their economic activities in multiple geographical
sites. However, unlike MNEs, MPDEs' locational choices occur within
the same national boundaries. In practice, from the perspective of a
spatial analysis, the two categories of firms can be treated in a similar
manner. However, as MNEs are always multiplant firms, whilst MPDEs
are not by definition involved in international production, there are ele-
ments which critically distinguish the two types of firms. In particular
