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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 14: Location Determinants of Foreign MNCs Investing at the Sub-national Level: The Role of State Government

Bindu Vyas


14. Location determinants of foreign MNCs investing at the subnational level: the role of State government Bindu Vyas INTRODUCTION The structure of the world economy today is clearly very different from that of two decades ago. The liberalization of markets within and between national economies accompanied by dramatic technological advances in biotechnology, electronics and telecommunications have created greater scope for multinational corporations to integrate the world economy through hierarchical strategic management of foreign affiliates. Multinational corporations (MNCs) seek advantages over uninational competitors by virtue of the greater geographic range of their activities. The impact of these new forms of enterprise has received substantial attention at the national level but very few studies have addressed subnational levels of host countries. While the reasons for inbound foreign direct investment (FDI) in the United States are well established, the problem of the location of affiliates at the sub-national level remains inadequately researched (Bagchi-Sen and Wheeler, 1989). The purpose of this chapter is to examine the determinants and effects of inbound FDI on the economy of the Commonwealth of Pennsylvania.1 The chapter uses historical data to examine the distribution of inward FDI in Pennsylvania as revealed by country of origin, mode of entry, magnitude of investment, growth, sectoral distribution. In the process, the chapter generates some comparisons between the industrial structure of FDI in Pennsylvania with that of the United States and other important states. The second section brings together the existing contextual theories of the determinants of sub-national location...

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