Studies in Regional Economic Development
New Horizons in Regional Science series
Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough
Chapter 3: Agglomeration and flows of outward direct investment: an analysis of financial services in the United Kingdom
Research on the foreign direct investment (FDI) activities of multinational enterprises (MNEs) has a long and rich tradition (Dunning, 2001). Research on the advantages, disadvantages and processes that arise in business clusters has a similar tradition (Marshall, 1890; Porter, 1998). While it is clear that there is a considerable amount of MNE FDI in clusters (Kozul-Wright and Rowthorn, 1998), that FDI is relatively highly concentrated geographically (Shatz and Venables, 2000) and that this activity is increasing (Nachum, 2003), the body of research on this interface is small (Birkinshaw and Solvell, 2000). However, it is growing fast in the face of increased globalization, deregulation and advances in information and communication technology, all of which have begun to prompt a re-evaluation of the spatial organization of MNE activity (Buckley and Ghauri, 2004). Much of the work on FDI location has focused on where firms will choose to invest overseas at a macro level with broad geopolitical regions or nations being the unit of analysis. Work done at the subnational level has tended to focus on broad variables relating to either costs or demand. This chapter adds to the growing number of studies focusing on agglomeration effects at the sub-national scale. The chapter further addresses the neglected question of whether agglomeration promotes outward direct investment (ODI) whereas the extant literature has almost exclusively focused on clusters attracting inward direct investment (IDI).