The Regional Economics of Knowledge and Talent
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The Regional Economics of Knowledge and Talent

Local Advantage in a Global Context

  • New Horizons in Regional Science series

Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough

The distinguished contributors advance the current research frontier in three novel directions which focus on: the role of human capital and talent for creativity, entrepreneurship and regional development; the role of institutions for the behaviour of firms and entrepreneurs; and the influence of the global context on the location, export and innovation behaviour of firms in a knowledge economy.
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Chapter 11: Clustering and the Location of Multinational Enterprises: An Exploration of Financial Services in London

Gary A.S. Cook and Naresh R. Pandit

Extract

11. Clustering and the location of multinational enterprises: an exploration of financial services in London Gary A.S. Cook and Naresh R. Pandit This chapter examines the small but growing literature that offers explanations for multinational enterprise (MNE) location in clusters. It tests the propositions of this literature against the findings of a study that compares MNEs and non-MNEs regarding the advantages and disadvantages of a location in the City of London financial services cluster, which has an extraordinarily large MNE component. As such it makes a contribution towards current efforts to bridge the gap between the established theories of MNE and those of industrial clustering. The evidence presented is based on 39 semi-structured interviews with very senior managers across seven major subsectors of the financial services industry in London and 310 postal questionnaires. The primary conclusion is that MNEs and non-MNEs have different and multiple motives for locating in the cluster. MNEs perceive significantly higher benefits of close proximity in terms of competing with rivals and benchmarking against them compared to non-MNEs. Moreover, they perceive significantly higher benefits of close proximity in terms of ease of communication and ability to have face-to-face contact than non-MNEs, undermining popular ‘death-of-geography’ arguments. There are two auxiliary conclusions. For MNEs, because strong clusters have disadvantages (e.g. congestion) and because advantages can change over time, MNEs need to continually assess which activities they need to locate in a cluster. The second auxiliary conclusion is that for MNEs, clusters may provide advantages over and above those...

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