Implications for Regions and Industries
Edited by Charlie Karlsson, Andreas P. Cornett and Tina Wallin
Chapter 4: How does distance determine multinational location choice? A literature review
One of the most salient features of the modern economy is the globalization of production, and one key actor contributing to this development is the multinational firm. Understanding where multinational firms locate and how they operate is at the heart of academic disciplines such as international business and, more recently, international trade. An important factor shaping the location decision is the role of bilateral distance between the home and host countries. In particular, researchers have shown that cultural, institutional, geographical and economic distance between home and host countries all have a bearing on the firm’s location decision. However, ongoing developments call into question current understanding of the role of bilateral distance. This chapter reviews the literature on the effect of bilateral distance between the home and host countries on the location behaviour of multinationals, highlighting key areas for future research to address.
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