Multinational Firms’ Location and the New Economic Geography

Multinational Firms’ Location and the New Economic Geography

New Horizons in International Business series

Edited by Jean-Louis Mucchielli and Thierry Mayer

This book analyses how foreign direct investors choose their locations, whilst exploring the forces which shape international economic geography. Although these two issues are, to some extent, inter-related, researchers have only recently acknowledged the similarity of economic geography and international business approaches to the empirical assessment of likely causes of the degree of spatial concentration observed in many modern industries.


Jean-Louis Mucchielli and Thierry Mayer

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


1 Jean-Louis Mucchielli and Thierry Mayer The location choices of multinational firms for their production plants is an important topic, not least because this phenomenon is accompanied by so many fears in the public debate. Recent experiences prove that the most important concerns are linked to trade integration episodes. During the process of North American Free Trade Agreement (NAFTA) adoption and implementation, expectations were strong that firms would relocate to Mexico their manufacturing activity in order to serve the North American market as a whole from this new low-cost base (the ‘Giant sucking sound’ of Ross Perot, being only the most vivid and famous expression of those widespread fears). The 1986 enlargement of the European Union (EU) to Spain and Portugal already witnessed similar concern. The next enlargement to 10 countries – mostly Central and Eastern European countries – programmed for May 2004, reinvigorates the arguments of those claiming that ‘Old Europe’ countries will lose in the process the little manufacturing industry production left from previous international opening of markets. By contrast, in 2002, some multinational firms like Canon or Philips have relocated their assembly plants or their common parts production from Mexico to China or Thailand. Will such a large-scale change in the European economic geography take place? Faced with such questions, we believe that economists should (and actually can) provide answers. Their work can use different tools, but we will focus here on two types of methodologies typically employed. A first approach starts by noting in the examples above...