Table of Contents

Innovation and Institutional Embeddedness of Multinational Companies

Innovation and Institutional Embeddedness of Multinational Companies

New Horizons in International Business series

Edited by Martin Heidenreich

Multinational companies are crucial actors in a global knowledge-based economy, combining the advantages of global and locally coordinated production and innovation strategies with specific regional and national factors. This book questions how MNCs can best exploit institutionally embedded knowledge, explores the utilization of external institutionally embedded knowledge in corporate innovation processes, and addresses the challenges of embeddedness.

Chapter 9: The Impact of Regional Institutional Characteristics on the Location of MNCs – a European Perspective

Knut Koschatzky and Elisabeth Baier

Subjects: business and management, international business, organisational innovation, economics and finance, international business, innovation and technology, organisational innovation


* Knut Koschatzky and Elisabeth Baier 9.1 INTRODUCTION Multinational companies (MNCs) are often regarded as footloose in the sense that they act independently from their regional environment. With their knowledge-accumulating and knowledge-processing capacities, MNCs can use product, production, distribution and development competences that they have accumulated in their homeland and in all other sociocultural and institutional contexts where branch plants are located. In this respect MNCs combine the advantages of globally coordinated product and production strategies with the advantages of local proximity and specific locational factors (Cantwell and Mudambi, 2000). Nevertheless, through different tangible and intangible interactions with other firms, research institutes and the economic system in general, they are linked to their specific regional environments at least to a certain extent. MNCs can profit from locating in regions that offer advantages of ‘local buzz’ and regional interconnectedness (Bathelt et al., 2004). The assumption is put forward in this chapter that MNCs are not per se footloose (cf. Görg and Strobl, 2003), but are to a certain extent linked to regional environments in the sense of ‘being there’ (cf. Gertler, 1995; Bunnell and Coe, 2001; Cantwell and Piscitello, 2002). Especially research-oriented MNCs choose locations that provide them with favourable assets for their innovative activities. With regard to research, development and innovation, the heuristic concepts of national or regional systems of innovation can be used as an analytical framework to identify institutional characteristics that explain the locational pattern of MNCs. According to these concepts, important influential factors are the industrial environment,...

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