Multinationals and Economic Geography
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Multinationals and Economic Geography

Location, Technology and Innovation

Simona Iammarino and Philip McCann

After more than fifty years of systematic research on multinational enterprises (MNEs) what is apparent is that there is, as yet, no unified or dominant theory of the MNE. The objective of this book is to bring into focus one particular dimension of MNE behaviour and activity that has been relatively under-researched – namely the geography of the multinational enterprise – as understood through the lens of innovation and technological change. The authors clearly demonstrate that geography is becoming increasingly important for MNEs and, in turn, MNEs are becoming progressively more important for economic geography. The pivot on which this vital relationship turns is the creation, diffusion and management of new knowledge.
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Chapter 4: The sources of innovation: the firm and the local system

Location, Technology and Innovation

Simona Iammarino and Philip McCann


Over recent years, the interrelationships between innovation, technology and industrial location behaviour have come to be seen as essential features of regional development. Technical progress has been a key element of the major transformations brought about by globalization. In the case of the MNE, these consist of increasing cross-border interdependence and the integration of all kinds of operations and functions, including those aimed at creating new knowledge and technology. On the other hand, the importance of contextual factors and systemic interactions in the process of the generation and diffusion of innovation has also been recognized in the literature as a key determinant of the technological and economic performance of firms, countries and regions. The significance of the geographical dimension of innovation systems has naturally emerged as the logical consequence of the emphasis put on the relations with sources of knowledge and innovation external to the firm. The multiple linkages which exist between internal and external knowledge sources and conditions will be discussed here by following a micro to meso logic. Thus, in this chapter we will start from the firm as the main actor at the centre of the analysis of innovation processes; then we will move on to the industrial and geographical system, eventually integrating the two levels of analysis with particular reference to the technological creation and accumulation processes of MNEs.

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