Multinationals and Economic Geography

Multinationals and Economic Geography

Location, Technology and Innovation

Simona Iammarino and Philip McCann

After more than fifty years of systematic research on multinational enterprises (MNEs) what is apparent is that there is, as yet, no unified or dominant theory of the MNE. The objective of this book is to bring into focus one particular dimension of MNE behaviour and activity that has been relatively under-researched – namely the geography of the multinational enterprise – as understood through the lens of innovation and technological change. The authors clearly demonstrate that geography is becoming increasingly important for MNEs and, in turn, MNEs are becoming progressively more important for economic geography. The pivot on which this vital relationship turns is the creation, diffusion and management of new knowledge.

Chapter 5: Multinationals, variety of geographies and evolution

Simona Iammarino and Philip McCann

Subjects: business and management, international business, economics and finance, economics of innovation, international business, regional economics, geography, economic geography, innovation and technology, economics of innovation, urban and regional studies, regional economics


Orthodox economic approaches largely consider both the multinational firm and the region or local system as black boxes whose characteristics, behaviour and innovative features are determined by exogenous factors. Conversely, endogenous perspectives, such as those in the management literature, tend to explain structure and growth mechanisms primarily as the result of forces which are purely internal to the firm. Hence, neither of these approaches is per se appropriate for investigating the links between the external and internal sources of innovation, and the issue ‘global versus local’ in the creation of new knowledge. Rather, the structure, features, behaviour and evolution of both the MNE and geographical space need to be considered within the context of their increasing interdependencies and in the light of their interactions between a variety of different knowledge transfer mechanisms. In the words of Dicken, ‘global’ and ‘local’ are not fixed scales; rather, they represent the extreme points of a dialectical continuum of complex mutual interactions’ (Dicken 1994: 103). This chapter is devoted to integrating the micro-level of the firm – focusing in particular on MNEs’ technological capabilities and strategies – and the meso-level of the regional system or industrial cluster, in order to explore the new combinations of internal and external sources of innovation in the modern age of globalization.

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