Cases and Policies
Edited by Charlie Karlsson
Chapter 14: Networks and Geographic Clustering as Sources of MNE Advantages: Foreign and Indigenous Professional Service
ﬁrms in Central London Lilach Nachum, Robert Laud and David Keeble* Using the combined insights of international management and network theories, we seek understanding of the networking behaviour of foreign aﬃliates. We focus on a speciﬁc kind of network, the one taking place between ﬁrms based in geographic proximity. Comparative analyses of foreign and indigenous ﬁrms in professional service industries located in Central London are used to isolate the networking attributes of ﬁrms in general from those that are unique to foreign aﬃliates. The ﬁndings show that there are considerable diﬀerences between foreign and indigenous ﬁrms in terms of some elements of network behaviour, and similarities along others. We attribute these diﬀerences to the speciﬁc nature of the competitive advantages of foreign aﬃliates as well as to their being part of an MNE network that partly replaces external networks. We stress the importance of studying interorganizational network relationships of professional service ﬁrms at a time in which these industries are being transformed by new forms of value creation activities. 1 Introduction International business and management theories suggest that the competitive advantages of foreign and indigenous ﬁrms will diﬀer. Foreign ﬁrms doing business overseas confront additional costs, arising from their operation in foreign countries, which are not incurred by indigenous ﬁrms (Hymer, 1960), what Zaheer has named ‘the liability of foreignness’ (Zaheer, 1995; Zaheer and Mosakowski, 1997). They oﬀset these costs by their ﬁrmspeciﬁc advantages, and hence develop a somewhat di...
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