Location, Technology and Innovation
Chapter 3: Firm location behaviour in theory: extensions to multiplant and multinational firms
As we saw in Chapter 2, issues of geography and location are only included in traditional models of multinational investment and behaviour at a very cursory level, with locations being defined primarily in terms of countries in international economics, and via the inclusion of location ‘L’ in Dunning’s eclectic OLI paradigm. In both of these traditions in general, the various specific local aspects of geography and location which affect and are affected by the presence of MNE investment are not explicitly discussed. However, whenever MNEs make investment decisions, they need to consider exactly where such investments are to be located, and the level of geographical specificity that MNE firms need to consider for such purposes is always much more detailed than simply in which country they should invest. The reason is that project investment returns and firm profitability can vary enormously over even very short distances within an individual national economy. As such, firms must consider first where to invest in terms of which country to invest in, but also at which particular location within that country should the investment be situated.
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