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Extending the Eclectic Paradigm in International Business

Essays in Honor of John Dunning

Edited by H. Peter Gray

John Dunning is undoubtedly the world’s leading scholar on the subject of multinational corporations and international business. This collection of original essays is designed to honor this work, particularly his achievements during his association with Rutgers University.
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Chapter 10: Towards a Theory of Hegemon-led Macro-clustering

Terutomo Ozawa


Terutomo Ozawa INTRODUCTION In conjunction with studies on agglomeration economies in spatial clusters, sub-national regional clusters (microregions) have been the focus of research by many scholars (inter alia: Piore and Sabel, 1984; Porter, 1990; Krugman, 1991; Saxenian, 1994; Markusen, 1996; Ohmae, 1995; Nachum, 1999; Dunning, 2000a). Recognizing the role of multinational corporations as a potent instrument of globalization, some (Dunning, 2000b; Blomstrom, Globerman and Kokko, 2000; Eden and Monteils, 2000) examined FDI activities in ‘macroregions,’1 a concept used in Dunning (2000a), but little is said – and understood – of the dynamics of supranational macro-clusters as another form of agglomeration. Furthermore, microregions are usually treated as the creatures of historical accident, and their connectedness with macro-clustering remains unexplored. This is rather surprising, given the fact that the EU, NAFTA, MERCOSUR and other regional arrangements, for example, are basically designed and created, at the policy level, as macro-clusters. Sure, they have already been analyzed as instances of economic integration, and some relevant theories – notably the theory of trade creation vs. diversion (Viner, 1950) and the theory of optimum currency area (Mundell, 1961) – have been advanced. But these theories are by nature static in analysis. True, usually mentioned are the ‘dynamic gains’ from expanded markets, such as raised efficiency due to increased competition, scale economies and stepped-up R&D, and a stronger bargaining power vis-a-vis the outside world. These are, however, only ‘one-time gains’ (Gray, 2002a) and merely the ‘adjustment’ effects of an enlarged economic unit, not the dynamic causes of...

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