The global agglomeration of multinational firms

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.     

Gravity,education, and economic development in a multinational affiliate location

This paper investigates the relationship between education and the location of multinational affiliates. It finds that US multinationals seek production locations with high levels of education rather than with uneducated labour. Furthermore, the education effect can be separated from the effects of overall economic development. Based on these results, the paper suggests why previous results regarding education and multinational affiliate location have been mixed. Using a gravity equation framework, the analysis also introduces a methodological innovation by including numerous economies that receive no investment. The expanded data set reveals that about two-thirds of the variation in multinational location can be explained by the standard gravity variables of host country size, transport costs, distance from the investing country, and host country remoteness. Furthermore, the elasticities are higher than those resulting from the analysis of the more restricted country samples used in nearly all research on multinationals. This suggests that previous research might have missed or underestimated relationships and may not be useful in understanding why some countries receive little or no multinational investment.     

An internalization theory perspective on the global and regional strategies of multinational enterprises

Many multinational enterprises (MNEs) claim to be pursuing a ‘global strategy’, but the majority of MNEs is not global, in the sense that these firms cannot emulate their domestic success outside of their home region. This inability is largely caused by compounded distance among regions and can be mitigated in part, by infusing a regional component into the MNE's international strategy. In this paper, we explore whether internalization theory can address the global versus regional strategy phenomenon. Specifically, we investigate whether internalization theory can predict under which circumstances MNEs will be able to pursue successfully a global strategy, and whether the theory can explain firm-level variations in utilizing regional components in international strategic governance. We argue that internalization theory can help regionalization scholars unbundle regional strategy by matching resource bundling needs with various firm-level resource recombination practices. We identify four distinct resource recombination processes with increasing complexity: fast bundling, principles-driven bundling, adaptive bundling and entrepreneurial resource orchestration, and argue that adopting the best-matched resource recombination practices will advance the MNE's success outside of its home region.     

Optimal integration strategies for the multinational firm

We examine integration strategies of multinational firms that face a rich array of choices of international organization. Each firm must provide headquarter services from its home country, but can produce its intermediate inputs and conduct assembly operations in one or more of three locations. We study the equilibrium choices of firms that differ in productivity levels, focusing on the role that industry characteristics such as the fixed costs of foreign subsidiaries, the cost of transporting intermediate and final goods, and the regional composition of the consumer market play in determining the optimal integration strategies.     

'Beyond the M-form': Towards a Critical Test of the New Form

This paper critically examines Bartlett and Ghoshal's claim that a radical new organizational form, distinctly different from the M-form both in terms of its structure and psychological underpinnings, may be observed among transnationals. The main theoretical dimensions of the M-form and the 'New Form' are delineated and compared within the context of the discourse between Transaction Costs Economics (TCE) and the Knowledge Based Approach on organizational advantage. Thereafter empirical evidence centred on ABB is extended and re-examined. On the basis of this analysis the thesis of an emergent new form is found to be unsupported. It is thus reasonable to assume that any organizational advantage transnational companies may possess still resides in hierarchical governance as identified by TCE and outlined in its multinational M-form application. To the extent to which it exists, normative social control has a secondary status.     

Entry to foreign markets and productivity: Evidence from a matched sample of Turkish manufacturing firms

We examine the effects of international trading activities of firms on creating productivity gains in Turkey by using a recent firm-level data set over the period 2003–2010. We establish treatment models and investigate the productivity improvements of firms through trade by using propensity score matching techniques together with difference-in-difference estimates. Three different groups of treatment are constructed: (1) firms that are involved only with import activities, (2) firms that are involved only with export activities and (3) firms that are involved with both export and import activities. The results of the study suggest that both exporting and importing have positive significant effects on total factor productivity (TFP) and labour productivity (LP) of firms. Importing is found to have a greater impact on productivity of firms compared to exporting. Further, two-way trade is found to have more significant effects than those of one-way trade on firm productivity. Finally, our results indicate that international trade has greater impact on LP rather than TFP of firms.     

Corporate images' impact on consumers' product choices: The case of multinational foreign subsidiaries

The aim of this study is to ascertain the extent to which consumers' images of home and foreign business units, and their perceptions of the corporate images held by other stakeholders, influence their buying behavior. The sample consisted of high school students in the United Arab Emirates (UAE) who intended or expected to enter higher education. Using a survey questionnaire, we asked respondents about the extent to which they believed their overall impressions of foreign universities operating in the UAE were influenced by images of the institutions' home and UAE campuses and by their perceptions of the images held by other stakeholders. We found that when deciding on whether or not to buy from a foreign firm, consumers will be most influenced by the corporate images held by other stakeholders rather than the images of home and foreign business units constructed by themselves. These findings suggest that it would be advisable for firms to adopt a stakeholder perspective when developing and implementing their marketing strategy.     

Entry decisions of multinational firms: The role of competition threats

How do multinational corporations (MNCs) influence each other's foreign entry decisions? In this paper, I examine the interactions in MNCs' entry decisions by investigating how MNCs respond to competition threats from their multinational competitors. The analysis shows that entry threats anticipated through foreign investment news encourage MNCs to take preemptive actions by entering the same city after the news, while the actual entry of competitors and the anticipated expansion of incumbents discourage more entry. Incumbent MNCs, on the other hand, respond to entry threats by upgrading productivity. The effect of competition threats depends on each MNC's own existing activity and production network within the region. The effect of entry threats increases with the size of threats, measured by the investment value, expected employment and expected output, the influence of the news, the credibility of the news and the local market orientation of the threats. Across industries, MNCs' entry decisions are found to respond to only the actual entry—not anticipated entry—in vertically linked industries. Further, by exploring the time path, I find that MNCs' preemptive entry is only taken before FDI news expires. The main results are robust to IV analyses that explore unique information from news source and news content.     

A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises

This paper addresses two important issues at the nexus of the literatures on international trade, foreign direct investment (FDI), foreign affiliate sales (FAS), and multinational enterprises (MNEs). First, the introduction of a third internationally-mobile factor (physical capital) to the standard 2 × 2 × 2 “knowledge-capital” model of MNEs with skilled and unskilled labor allows us to resolve fairly readily the puzzle in the modern MNE literature that foreign affiliate sales among two identical economies completely displace their international trade. Intra-industry trade and intra-industry FDI (and FAS) can coexist for national and multinational firms (with identical productivities) in identical countries. Second, the introduction also of a third country to the model suggests a formal N-country theoretical rationale for estimating gravity equations of bilateral FDI flows and FAS, in a manner consistent with estimating gravity equations for bilateral trade flows.     

Adjustment strategies of multinational enterprises to changing national competitiveness

This article establishes a link between four combinations of relative firm‐specific advantages and comparative advantage and the adjustment strategies of multinational firms. Based on the distribution of firms across advantage combinations, hypotheses on four adjustment strategies are developed: expansion, rationalization, exit and relocation. Upon a detailed analysis of a representative sample of manufacturing firms for 1990–2000, a consistent competitiveness ranking of domestic and foreign firms across industries and over time is derived. The strategies followed by the firms are reflected by the development of employment, value‐added and exports. Results show that firms are not distributed entirely in line with comparative advantage, but the dynamic interaction (“match”) of location‐advantage and firm‐specific advantage seems to be decisive. Results also confirm that domestic and foreign firms partly react differently under a given advantage combination. The following principles for location policies are suggested: the empirically measured mismatch of firm capabilities and location advantages determine when direct and indirect measures should be used. The intensity of policy measures should be oriented towards the competitiveness ranking derived.     

Location choices of multinational firms in Europe: The role of EU cohesion policy

Using data on 5509 foreign subsidiaries established in 50 regions of 8 EU countries over the period 1991-1999, we estimate a mixed logit model of the location choice of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non-European ones.     

Regional integration and the international strategies of large European firms

From the perspective of regional economic integration we decompose international strategy into regional integration strategy and three types of global strategy (global sales, global production, and pure global integration). Using 1100 firm-year observations we find that 60% of the largest European firms pursue a regional integration strategy. We also find that global strategies vary. We examine the firm specific factors that affect global strategies. In general, R&D capability determines a global production strategy, whereas firm size and managerial capability determine both a global sales strategy and a pure global integration strategy.     

跨国公司对我国工业结构竞争力的影响研究

在前期研究基础上,本文建立FDI产业对先导工业、主导工业、支柱工业和劣势工业部门的贡献指标体系,并分析了FDI工业对我国近期工业结构的影响.结果表明,FDI工业主要是通过进入我国主导工业群以提升我国工业结构竞争力;但也应看到跨国公司控制了我国高技术型主导工业,从而导致我国工业结构竞争力"空心化"的潜在风险.因此,我国要采取有效措施,调整不同工业部门群的FDI准入导向,同时加强我国主导产业的核心竞争力建设.     

跨国公司海外研发转移的区位分析

随着经济全球化和知识化进程的加快,跨国公司进一步实施研发全球化战略,以支持其海外市场的开发,并充分利用海外科技资源服务于跨国公司的全球竞争。以跨国公司海外研发转移为主题,研究其转移的地域特征和海外研发动因对区位选择的影响,从而提出跨国公司研发转移的区位选择因素,并可以了解IT行业研发转移的区位特点。     

Subsidiary goals,learning orientations,and ownership strategies of multinational enterprises: evidence from foreign direct investments in Korea

This paper investigates the links among subsidiary goals, learning orientations, and ownership strategies of multinational enterprises (MNEs). The authors hypothesize that an MNE's ownership strategy is determined by subsidiary goals and learning orientations. Furthermore, interactions between learning orientations and subsidiary goals are predicted to influence the ownership strategy. Based on 723 foreign subsidiaries of MNEs operating in Korea, our findings suggest that when MNE foreign subsidiaries influence ownership choice, market-seeking goals and resource-seeking goals have a stronger fit with the exploitation orientation than with the exploration orientation. In contrast, the category of knowledge-seeking goals has a stronger fit with exploration than with exploitation.     

Knowledge embeddedness and the transfer mechanisms in multinational corporations

This paper reports a qualitative study conducted at four Japanese subsidiaries in China and Vietnam about their process of international knowledge transfer. Building on the literatures concerning the diverse types and characteristics of knowledge in multinational corporations (MNCs), we explore the broad mechanisms adopted and locally generated by the host country subsidiaries for transferring the foreign knowledge and putting the locally embedded knowledge into practical use at the local settings. The findings indicated (1) the limitations of applying a standardized and universal set of knowledge transfer mechanisms without considering local idiosyncrasies and (2) the contributions of local agents and institutions throughout the process of local knowledge adaptation and development.     

A model of demand,productivity and foreign location decision among Taiwanese firms

We develop a theoretical framework to examine the relative importance of firm demand and productivity in firm decisions to export and where to locate foreign direct investments. The model shows that the equilibrium firm decision depends on product technology, consumer preference for product quality, fixed investment costs of establishing a foreign subsidiary, transportation costs and relative wages. Our empirical results confirm the predictions of the theoretical model. Firm-level demand and productivity components are important in explaining the decision to participate in foreign markets with their relative importance depending on the firm's organizational form (exports versus FDI) and the destination of the investments. In general, FDI firms are more productive than exporting firms regardless of FDI destinations. FDI firms also have a higher demand component than exporters and this demand component is stronger than productivity. Finally, among FDI firms, while those with a high demand index and productivity have a significantly higher propensity to invest in high-income countries, firm productivity is the sole determinant of firms undertaking FDI in low-income countries.     

The influence of cooperative relations on geographical expansion and diversification strategies in family firms

This study examines the relationship between existing partnerships and geographical expansion and diversification strategies in family firms in the Spanish manufacturing sector. It specifically analyses whether the family nature of a business and its cooperative relations (vertical cooperation with clients and suppliers, horizontal cooperation with competitors, and institutional cooperation with technology centers and universities) influence its geographical expansion and diversification strategies, and whether there are significant differences between family and non-family firms. This paper includes a review of the literature and an empirical study with a sample of 1848 companies of which 824 are family firms. Significant differences were generally found between family and non-family firms, depending on the type of partner selected for cooperation and the relationship between the types of cooperation and the growth strategies developed by them. Research results and policy implications are discussed, and management practices are proposed.     

Core employee based human capital and revenue productivity in small firms: An empirical investigation

The human capital of a firm, as manifested by the experience and education of its workforce, represents a key resource that improves firm productivity. The current study proposes that task-specific experience is a significant organizational resource for small firms seeking productivity. Utilizing objective data from 1572 core-employees representing 100 small firms in two different industries, this study examines how two types of experience (task-specific and firm-specific) interact with education to influence firm productivity. Results show that the relationship between task-specific experience and productivity is stronger in firms with higher levels of core employee education than in firms with lower levels of core employee education.