Essays in Honor of John Dunning
Edited by H. Peter Gray
Chapter 7: Institutions, Exclusivity and Foreign Investment
7. Institutions, exclusivity and foreign investment Sarianna M. Lundan INTRODUCTION In this chapter we revisit the issue of investment attraction and retention from the perspective of a region wishing to attract foreign investment. Conceptualizing the MNE as a learning or knowledge network, as has been done in many contributions recently, allows us to reﬁne the discussion of investment attraction, and in particular the issue of investment retention. We argue that the ‘learning subsidiary’ wants to belong, both to the internal MNE network, as well as to the institutional network of its host region, and that investment retention is conditional on the extent to which the MNE can appropriate the economic payoﬀ from its insider status in the long run. A large part of the international business literature to date has not been primarily concerned with the location-bound component, but rather with the issue of mobility. In the 1970s and 1980s the focus was on the development of theories of foreign direct investment as well as the ﬁrm’s process of internationalization, with the so-called Uppsala or behavioral school focusing on the resources and limitations that allow for initial internationalization, while others considered the managerial issues related to the mode of entry. Along with the maturation of the investments made in the 1970s and 1980s, attention has shifted from the processes of expansion of the ﬁrm more toward the exploitation and further integration of the extant investments of the multinationals. In their highly inﬂuential work Bartlett and Ghoshal (1989) were...
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