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Location strategy in cluster networks

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Abstract

This article investigates the location strategies of Canadian and Chinese multisite firms in international and domestic investment decisions at the metropolitan level. By integrating research from international business studies and economic geography, we combine knowledge-based understandings of multinational corporations and industrial clusters to develop propositions regarding the location strategies of multisite firms in cluster networks. It is argued that firms from clusters are more likely to adopt knowledge strategies than firms from other areas and that they tend to choose cluster locations that are specialized in the same or similar industries to achieve their knowledge goals – both in domestic and international investment decisions. We establish and analyze a database of 3500 investment cases within and between Canada and China to test our propositions. The results show that firms in knowledge-intensive industrial environments with substantial business experience are especially inclined to direct their investments to clusters. Consistent with our emphasis of the subnational as opposed to the national scale, we find that cluster-of-origin effects are more important than country-of-origin effects in explaining firms’ investment choices in clusters. These findings support the idea that multisite firms, particularly MNEs, leverage local knowledge pools by strategically locating affiliates across clusters.

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... Regarding the determinants of OFDI most evidence usually focuses only on one end, either the destination or origin of the investment (P. Li & Bathelt, 2018). ...
... Namely, it has been recently shown that the influence of the 'cluster-of-origin' is far more important than that of the 'country-of-origin' in explaining firms' investment location choices (e.g. Li & Bathelt, 2018;Turkina & Van Assche, 2018), and that localised regional and cluster networks affect the shape of global urban networks (Bathelt & Li, 2014). Despite the recognition that integrating firms' organisational issues with the characteristics of the subnational regions is crucial for the understanding of MNEs and their spatial environment (Beugelsdijk et al., 2010), the literature on the geography of internationalisation at the regional sub-national level has mainly dealt with international trade (e.g. ...
... The argument can be taken forward by considering the level of local competition à la Porter (1990), whereupon firms originating in highly competitive local settings within industrial clusters are more likely to pursue asset/knowledge-seeking internationalisation strategies than firms in other settings (P. Li & Bathelt, 2018). ...
Thesis
Economies around the globe are increasingly interconnected. Foreign Direct Investment (FDI) has become one of the main drivers of economic interdependence among regions across the world. FDI as a flow of capital across international boundaries is bound to have distinctive effects on the human capital accumulation process in both home and host economies, with important consequences for economic development. The aim of this thesis is to improve our understanding on the geography of two interrelated economic phenomena for Mexican subnational regions: FDI and Human Capital. Mexico has been an important recipient of inward FDI, but in the last two decades the services sector has been gaining importance over manufacturing, while the country has been increasingly sending flows of outward FDI to the rest of the world. Concurrently, wage inequalities persist, educational outcomes are lagging behind, and demand for skilled workers is decreasing. These changing trends and shifting balance have important implications for wages and the incentives to develop human capital at the local and regional scale in Mexico. Moreover, the aforementioned changes in FDI patterns, wages and human capital have occurred in a country where territorial disparities are still commonplace. Against this background, these papers explore several relationships between FDI and three dimensions of human capital accumulation, namely; wages, educational attainment, and skills. The first paper examines the effect of inward FDI on the wage gap between skilled and unskilled workers. Departing from these findings, the second paper analyses the effect of higher wages offered by multinationals on youth educational choices. The third paper explores the regional determinants of the recent internationalisation of Mexican firms, with particular attention to skills, productivity and innovation. Finally, the fourth paper explores the effects of outward FDI on the relative demand for skilled and unskilled workers. In order to empirically investigate the aforementioned relationships, I deploy a wide array of econometric techniques that allow me to provide quantitative estimates of the associations at hand. Particular attention is placed on endogeneity concerns that may lead to statistical biases on the evidence provided. By adopting a regional- and industry-level perspective, the present thesis hopes to shed some light on the effects of bidirectional FDI on various Human Capital dimensions. Policy implications drawn from the findings herein, are of paramount importance. Mexico has taken significant strides towards development; however, it still has a sizeable untapped economic potential. This and other empirical evidence should be duly considered if Mexico is to escape the middle-income trap.
... Locating in industrial cluster has many benefits and challenges, which could have different effects on different firms depending on how firms treasure the advantages and how they can deal with the challenges. Li and Bathelt (2018) have argued that firms' specific characteristics would affect their choice to invest in foreign industrial clusters. Firms which originate from industrial clusters and developed countries are more inclined to choose industrial clusters, as they are born in highly innovative and competitive environments. ...
... Another definition of location quotient is based on the number of employments in an industry in a certain region. Evidence has shown no significance in measure effects between the two methods, as they both represent the level of specialization of an industry in one region (Li and Bathelt 2018). Therefore, we specify the location quotient as: ...
... (2) the proportion of top managers with PhD degree and above. Fourth, to control for the industry group, we extend the method of Li and Bathelt (2018) and divide all 27 industries into 7 industry groups, and include industry groups fixed effects in all regressions. Finally, we use the logit regression model to test our model. ...
Article
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This article investigates the role of firm’s top management team (TMT) in its location strategy in oversea investment decision. From the perspective of the upper-echelon theory and knowledge-based view, we study how knowledge-related characteristics of TMTs, such as education background, foreign experience and R&D experience affect the firm’s oversea location choice to invest in an industrial cluster. Using data of OFDI cases from Chinese firms to European sub-national regions from 2006 to 2016, we find that: (1) TMT’s education background has a positive effect on firm’s OFDI decision in industrial clusters; (2) TMT’s foreign experience has a positive effect on firm’s OFDI decision in industrial clusters; (3) TMT’s R&D background increases the firm’s likelihood to invest in industrial clusters. Our findings provide implications related to the effects of TMT characteristics on emerging market firms’ oversea investment activities.
... The recent global transformations pose major challenges for industrial clusters and industrial districts (IDs), which traditionally rely on accumulation of endogenous knowledge through a dynamic system of informal local interactions (Markusen, 1996;Dunford, 2006;De Propris & Lazzeretti, 2009). In the fast-changing world of technology, localized learning is still relevant, but no longer sufficient to ensure the degree of sophistication and technological advancement required to foster local economic growth (Li & Bathelt, 2018). The inability of ID firms to tap into external knowledge pools can generate detrimental effects, such as technological lock-in and over-embeddedness, eventually fading the advantages associated with agglomeration economies (Giuliani & Rabellotti, 2017). ...
... The literature on industrial agglomeration has shown that clustering generates multiple advantages for firms, ranging from labour market pooling to the availability of specialized input suppliers (Delgado et al., 2014). One of the main benefits of geographical proximity is the opportunity for local actors to exchange know-how on a regular basis, exploiting repeated face-to-face contacts and employees mobility (Felzensztein et al., 2010;Li & Bathelt, 2018). The majority of these daily interactions occur at the informal level and facilitate the creation of a shared system of values in the local community, increasing generalized trust and reducing transaction costs (Dunford, 2006). ...
... Therefore, the success of ID and cluster firms has been increasingly associated with the ability to tap into more distant knowledge pools Turkina & Van Assche, 2018). Translocal linkages are beneficial in that they enhance resource flows between the local network and the external environment, facilitating knowledge exchange and technological upgrade (Bathelt et al., 2004;Lorenzen & Mudambi, 2013;Li & Bathelt, 2018). By accessing distant knowledge, local actors can overcome their weaknesses, preventing the risk of technological lock-in and avoiding cognitive inbreeding (Li & Bathelt, 2018). ...
Article
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This paper discusses the impact of formal cooperation on the performance of Italian firms operating inside and outside industrial districts (IDs). The analysis is focused on a policy tool (Contratti di Rete or network agreements) introduced in Italy to promote the use of non-equity alliances among smaller firms. We claim that the impact of both inward-and outward-looking partnerships is moderated by the local environment in which member firms are embedded. The results show that the benefits from the policy measure are more evident for outward-looking agreements that do not involve ID firms. Inside IDs, firms do not seem to be capable of reaping significant gains from the use of formal cooperation. From a policy perspective, our findings suggest that decision-makers should tailor their interventions to the features of the local economic environment, promoting strategies aimed at maximizing the outcomes of formal cooperation while accounting for geographical differences.
... Given the characteristics of global cities, they are also expected to be strong attractors of global research and development (R&D) investments of MNCs. Prior work has examined R&D location decisions at the country level (e.g., Bas & Sierra, 2002;Belderbos et al., 2017bBelderbos et al., , 2017cKumar, 2001), at the level of regions or cities within specific countries (Abramovsky et al., 2007;Autant-Bernard, 2006;Belderbos et al., 2020;Li & Bathelt, 2018), at the level of regions within Europe (Basile et al., 2008;Belderbos & Somers, 2015;Belderbos et al., 2014;Siedschlag et al., 2013), or in cities in the context of manufacturing-R&D collocation propensities (Castellani & Lavoratori, 2020), but has not specifically examined R&D investments in global cities. 1 In this paper, we contribute an analysis of the R&D investment location choices of multinational firms among the world's major global cities. We argue that even given their general attractiveness as location of MNC activities, there is substantial heterogeneity in the strength of locational factors attracting R&D investments across global cities, with cities heterogeneously positioned to serve as hotspot of innovation. ...
... We contribute to the literature on global cities (Asmussen et al., 2019;Belderbos et al., 2020Belderbos et al., , 2017aBlevins et al., 2016;Clark, 2016;Derudder et al., 2015;Derudder & Taylor, 2018;Goerzen et al., 2013;Sassen, 2001Sassen, , 2006Wall & van der Knaap, 2011) by highlighting their heterogeneous roles in global innovation and as hotspots of multinational R&D activity. We contribute to the stream of literature on regional R&D investments and regional innovation performance (Abramovsky et al., 2007;Autant-Bernard, 2006;Basile et al., 2008;Belderbos et al., 2014Belderbos et al., , 2016Belderbos & Somers, 2015;Breschi & Lenzi, 2015;Cantwell & Piscitello, 2005;Essletzbichler, 2015;Li & Bathelt, 2018;Rigby, 2015;Siedschlag et al., 2013;Verginer & Riccaboni, 2021) by showing the important and systematic heterogeneity in the city-level drivers of R&D investments and the differences between R&D investments. ...
... Knowledge generated by local firms and universities is an important source of geographically bounded knowledge spillovers benefitting R&D activities of foreign firms. Agglomeration advantages tend to be strongest for firms' R&D activities, leading to patterns of strong geographic concentration (Alcacer, 2006;Audretsch & Feldman, 1996;Hilber & Voicu, 2010;Jofre-Monseny et al., 2011;Li & Bathelt, 2018;McCann & Mudambi, 2004;Rosenthal & Strange, 2003). Co-location facilitates knowledge spillovers and the creation of knowledge networks (Maggioni et al., 2007) through formal interactions and informal encounters in which tacit knowledge is exchanged (Boschma, 2005;McCann, 2011), allowing cities to develop new knowledge often based on existing strengths (Essletzbichler, 2015;Rigby, 2015). ...
... While the literatures on clusters of localized knowledge flows and on international business knowledge networks have tended to proceed largely independently of one another, with just some occasional cross-referencing, recent trends in scholarship in each of these fields have created the potential for a more substantial conversation (Bathelt et al., 2004;Glu¨ckler, 2006;Cantwell, 2009;Bathelt and Glu¨ckler 2011;Beugelsdijk and Mudambi, 2013;Bathelt and Cohendet, 2014;Cano-Kollmann et al., 2016;Cantwell and Salmon, 2018;Jones, 2018;Cook et al., 2018). Building on longstanding traditions, economic geographers have focused attention on the causes and effects of international interdependencies between regions, accentuating the spatial differentiation and interrelatedness of activities (Scott and Storper, 2003;Li et al., 2012;Li and Bathelt, 2018). In international business, greater consideration has been given to interactions between firms and different social and political institutional contexts at the national level (Berry et al., 2010. ...
... However, in many investment processes, there is no immediate network of partners in the target region. While international business research tends to focus on overcoming the institutional distance to other countries, the urban or regional scale is often neglected, yet it is often at least as important to consider as the national one (Alcacer and Chung, 2007;Li and Bathelt, 2018;Mudambi et al., 2018). Extant research often discusses which firms are successful in mastering this process rather than actually how this is managed. ...
... It is through such processes that broader corporate knowledge spillovers, which are characteristic of true transnational firms, can take place (Wang and Zhao, 2018). This supports findings in economic geography that urban-regional or cluster contexts become increasingly important with respect to knowledge-based innovation processes (Tallman et al., 2004;Li and Bathelt, 2018) as reservoirs of specialized knowledge flows. Amendolagine et al.'s (2018) paper looks at frictions in the knowledge internationalization process in emerging market MNEs by investigating acquisition processes of Chinese and Indian MNEs in Europe, North America and Japan. ...
Article
The increasing interconnection of local, trans-local and transnational knowledge networks is the outcome of the coevolution of (i) knowledge centers, typically city regions, (ii) epistemic communities that are grounded in and connect these regions and (iii) firms, usually multinational enterprises (MNEs). This interaction has created opportunities for innovation, but it is also impeded by a range of frictions that arise in the process of integrating locally embedded knowledge from geographically dispersed and culturally disparate regions across different countries. This article develops a simple model of how such frictions that MNEs encounter in their knowledge internationalization process can be overcome through ongoing processes of connecting, sense-making and integrating. © The Author(s) (2018). Published by Oxford University Press. All rights reserved.
... Ter Wal, 2013). Finally, MNE strategy is also considered in some cases, as bridging with the IB literature (see Hervas-Oliver and Boix-Domenech-Domènech, 2013;Cainelli, Di Maria and Ganau, 2014;Mariotti, Piscitello and Elia, 2014;Li and Bathelt, 2018). ...
... Overall, the influence of EG issues in the IB research agenda is minor and less active, with some exceptions (e.g. Li and Bathelt, 2018;Bathelt and Li, 2014;Hervas-Oliver and Boix-Domenech, 2013). Similarly, the study of MNE subsidiaries, their strategies and interactions with clusters is under-researched in the EG literature. ...
... Bathelt, Mudambi or Birkinshaw) producing cross-fertilized studies (e.g. Mudambi et al., 2018;Bathelt, Cantwell and Mudambi, 2018;Li and Bathelt, 2018), that are building momentum for a more integrated and substantial joint conversation. ...
Article
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Purpose For the specific topic of multinationals in clusters, both regional strands and international business and management literatures address the topic from different yet intertwined perspectives. This study aims to facilitate the integration of the conversations and the distinct literatures to produce a clear understanding and conceptualization of the existent knowledge on the topic, with the aim to foster an integration of those different lines of inquiry on the topic that can advance scholarly research and improve policymaking. Design/methodology/approach Mixing a robust and longitudinal bibliometric analysis (1992-2018) and a qualitative critical review, the study disentangles sub-conversations on the topic in each literature. Findings The study encounters commonalities that foster cross-fertilization and blind spots that prevent integration of findings from each literature. Research limitations/implications Both literatures need to cross-fertilize and integrate each other’s knowledge. Originality/value To the best of the authors’ knowledge, this study is the first to integrate literatures using bibliometrics, mapping the existing knowledge on two key areas of competitiveness: clusters and multinationals.
... The influence of the fourth industrial revolution on global production networks has been also only recently analysed by researchers including the prestigious EU funded H2020 project MAKERS 1 which covers the general aspects of global value chains (GVC) and industrial districts ID (including clusters) or papers devoted exclusively to mutual relations between I4.0 and clusters . Against this background, the scholarly work linking clusters with internationalisation -the most advanced form of that, i.e. foreign direct investment (FDI) -is relatively well established (Li and Bathelt, 2018;Jankowska, et al ., 2017;Jankowska and Götz, 2017;Pavelkova, et al ., 2016;Ffowcs-Williams, 2012;Belussi, 2018). ...
... Broadly understood knowledge as a source of a cluster's attractiveness for FDIs had been distinguished due to the growing role of technology-driven FDIs , and an intangible character of this production input including the issue of tacit, sticky, uncodified knowledge (Malmberg and Maskell, 1999;Dunning, 2000;Krugman, 1991;Li and Bathelt, 2018). Theories such as asset-augmenting (exploiting) or knowledge-seeking FDI stipulate the MNEs' interests in gaining access to foreign knowledge sources, whereas Marshall's approach, concepts of regional learning, learning region, or GREMI framework suggest that a cluster may be an environment conducive for knowledge processes. ...
... Based on the second-hand data and extant literature one may, however, attempt to specify the channels of influence. It can be speculated that a cluster's diagnosed importance for nurturing the conducive knowledge environment of I4.0 -the centre of competence and the ecosystem of technology transfer -translates into improved innovativeness and hence the competitiveness of cluster inhabitants increasing their specific advantages and thus influencing their propensity of engaging in foreign activities and investing abroad (Zucchella and Siano, 2014;Li and Bathelt, 2018;Mudambi et al ., 2018). ...
Article
The novelty of Industry 4.0 (I4.0) as a research topic means that the literature covering the interrelations between digital business transformation and categories such as internationalisation, foreign direct investment (FDI), or clusters is scant. This paper shows that clusters may contribute to the advancement of I4.0 while at the same time they stimulate the internationalisation of indigenous firms and the inflow of foreign investors. Based on conceptual deliberations it develops a research agenda for exploring how clusters might affect OFDI and IFDI by facilitating the I4.0. It can advance our understanding on the spatial aspects of the ongoing business digital transformation.
... By way of contrast, although the recently expanded IB network literature has long been grounded in the Uppsala business network approach, newer research has come to use the terminology of embeddedness in a network, often to refer more specifically to a geographically local context (e.g., Asakawa et al., 2018;Cantwell & Iammarino, 2003). This is a natural extension in the conceptualization of how we think about an IB network, since it follows the equivalent usage of the terminology of local embeddedness in the field of economic geography, especially when referencing the role of clusters (e.g., Li & Bathelt, 2018). For IB scholars, the existence of local clusters has given rise to discussions of whether foreign-owned MNC subsidiaries may be able to benefit from local knowledge spillovers when located in a cluster, or indeed how they might contribute to a local business network in which they become embedded (Cantwell, 2009). ...
... Indeed, the management of knowledge diversity across local metropolitan networks may in itself help to explain the ability of MNCs to benefit from greater geographic scope (Scalera, Perri, & Hannigan, 2018). More specifically, firms are better able to connect geographically distant clusters where the local and international networks have some related characteristics which facilitate new valuecreating opportunities through the cross-fertilization of networks (Choudhury, Geraghty, & Khanna, 2012;Li & Bathelt, 2018;Turkina & Van Assche, 2018). ...
... International business network structures and embeddedness E.g., Cantwell (1989), Hedlund (1994), Nohria and Ghoshal (1997), Cantwell and Iammarino (2003), Chini (2004), Monteiro et al. (2008), Cantwell (2009), Johanson and Vahlne (2009), Cantwell and Mudambi (2011, Asakawa et al. (2018), Awate and Mudambi (2018) and Li and Bathelt (2018) Connectivity across firms and places E.g., Rosenkopf and Almeida (2003), Belderbos and Zou (2007), Derudder et al. (2007), Vasudeva et al. (2013), Cano-Kollmann et al. (2016, Zhang and Pezeshkan (2016), Bathelt et al. (2018) and Stallkamp et al. (2018) Local-global interactions and the spread of knowledge hubs E.g., Hymer (1972), Cantwell (2005), Kali and Reyes (2007), Glückler (2011), Choudhury et al. (2012), Goerzen et al. (2013), Kim (2013), Lüthi et al. (2015), Cantwell and Zaman (2018), Harmancioglu and Tellis (2018), Li and Bathelt (2018), Scalera et al. (2018), Turkina and Van Assche (2018) and Useche et al. (2020) units within an MNC R&D department (Tortoriello, Reagans, & McEvily, 2012); within the same company, the results showed that bridging across intraorganizational boundaries with a Simmelian tie (i.e., a tie between two people who are both connected to a third person) was particularly generative of innovation (Tortoriello & Krackhardt, 2010). These kinds of strong, bridging ties, require considerable emotional energy and commitment, and require further research attention within the IB research program. ...
Article
Insights from social network research have generated significant advancements in disciplines such as sociology, economics, and psychology. In comparison, the incorporation of social network ideas into international business (IB) research remains more limited. The purpose of this special issue is to foster further research on social networks in IB. In our introductory essay, we provide a brief overview of network research in the IB domain to give a sense of some of the major ongoing themes and to illustrate how the social network approach can provide fresh insights and add substantive value to the field. To emphasize the considerable potential of using social network theories and ideas to advance research and understanding in IB, we also indicate some future directions. We follow these with a summary of the five articles in the special issue.
... The advantage of management studies lies in a deep understanding of what happens inside the firm, while geographer's work tends to emphasize how the firm's business environment shapes its competitive advantages or disadvantages. Geographers benefit from the research exchange with management studies since the firm-centered approach addresses the concern that many regional development theories lack a solid foundation of microeconomic processes (Li and Bathelt 2018). ...
Chapter
Geography has historically enjoyed strong interactions with other disciplines in addressing major challenges related to social, economic, and environmental issues and in contributing overall to sustainability. More especially in the Anthropocene, issues such as climate change, biodiversity loss, terrorism, poverty, refugees, environmental hazards, and pandemics have emerged that require an improved understanding of spatial and temporal patterns, processes, and impacts. Consideration of scale and place-based perspectives are essential in helping to resolve such complex issues. The chapter highlight five arenas of interaction between geography and other disciplines, viz. the natural sciences, socioeconomic sciences, humanities, human-environment relationships, and sustainability science. The International Geographic Union (IGU) provides a platform to unite geographers globally to share ideas, promote communication, and advance the interaction of geography with other disciplines, and also with different stakeholders from NGOs, governmental agencies, and international organizations. At this critical juncture, Geography must continue to develop through its vibrant connections with other fields and geographers should continue to exhibit interdisciplinary leadership by embracing different perspectives, by supporting institutional arrangements that foster interdisciplinary activity, and by seeking the knowledge and techniques that other fields can contribute to geographic perspectives, approaches, and insights to the collective effort. The IGU continues to play an important role in facilitating knowledge development and sharing, and in encouraging transformational actions that promote a just, peaceful, and sustainable planet.
... City-regions that host technology clusters are found in both emerging and advanced economies (Li and Bathelt, 2018). Hence, MNEs search internationally for knowledge supplements and may even challenge the dominance of R&D activities carried out in their home country (Mudambi and Navarra, 2004), where R&D has traditionally been co-located with MNE headquarters. ...
Article
Much of the rising international connectedness of city-regions has developed from MNEs replacing local connections with (superior) international ones. This often creates local disconnectedness that energizes the current populist backlash against MNE activities. We develop approaches to new IB theory, addressing the interdependencies of MNEs and city-regions that we propose as a crucial avenue for future research. We contrast two generic MNE strategies. The first is the traditional one: the ‘global orchestration’ of resources and markets. We argue that it exacerbates local disconnectedness. The second, that we call ‘local spawning,’ involves engaging with the local entrepreneurial eco-system to create and renew local connectedness, diffusing populist responses. Some MNEs are better able to implement a local spawning strategy, due to industry factors like innovation clock-speed, and firm characteristics like organizational path dependency. Finally, we distinguish between disconnection, which is an outcome of MNE strategy, and global disruptions, like the coronavirus (COVID-19) pandemic, which are primarily stochastic events. Addressing disconnections requires MNEs to re-orient their strategies while dealing with disruptions requires undertaking risk mitigation. We present empirical evidence from city-regions around the world to illustrate our theory.
... This chapter aims to review the recent debate on de-globalisation and to present some preliminary evidence that reconsiders the value of a manufacturing activity in light of the current geopolitical turmoil and new technological availabilities (The Economist, 2009). This is somehow important as changes in the nature of markets and technology can significantly impact on firms' location decisions in relation to manufacturing activities (Chidlow et al., 2009;Chidlow et al., 2015;Li and Bathelt, 2018;Mudambi et al., 2018). More specifically, such location decisions can relate to the adaptation of a reshoring strategy, which involves bringing manufacturing production (or part of it) back from abroad. ...
Chapter
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... The advantage of management studies lies in a deep understanding of what happens inside the firm, while geographer's work tends to emphasize how the firm's business environment shapes its competitive advantages or disadvantages. Geographers benefit from the research exchange with management studies since the firm-centered approach addresses the concern that many regional development theories lack a solid foundation of microeconomic processes (Li and Bathelt 2018). ...
Chapter
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The chapter’s purpose is to examine interactions between geographers of socialist countries with IGU and the world geographical community at large in 1945–1990. The authors consider some specific national trends in the development of geography in the former USSR, Poland, and China under the conditions of ideological constraints and geopolitical tensions. A special attention is paid to the forms and impact of internationalization on geography in these countries and the ways of the dissemination of scientific information. The authors show that participation of geographers from their countries in the activities of IGU was of particular importance in the extension of international contacts. It improved the positions of geography in the country and at the same time stimulated the use of new methods and approaches in geographical studies, and allowed spreading of national geographical concepts abroad. A particular role in internationalization belonged to academic leaders. In general, the development of geographical science in socialist countries follows the global paradigm.
... In this study, we define multiple co-located clusters as those economic entities that are part of the same organizational field of related industries and technologies (DiMaggio & Powell, 1983), located in the same city-region or regional context and characterized by a combination of within-and between-cluster labor market, production, and research linkages (Malmberg & Maskell, 2002). Despite their relative geographical proximity, linkage patterns within and between these clusters can take a different form (Li & Bathelt, 2018). If strong interactions develop between them, the clusters should not be viewed as atomistic entities, but as interdependent clusters that co-exist in relation to one another (Parr, 2002;Phelps, 2004). ...
Article
The Beijing economy has an unusual industrial configuration consisting of multiple industry parks in the biomedical industry with a cluster‐like structure, specifically Yizhuang Park, Daxing Park, and ZLS (Zhongguancun Life Science) Park. If these industry parks can indeed be conceptualized as clusters, a number of questions arise regarding their collaborative or competitive relationships that can potentially be both beneficial and detrimental. We begin analyzing this case of three biomedical industry clusters by conceptualizing four ideal‐type scenarios of co‐located cluster configurations and identifying their within‐cluster and between‐cluster linkage patterns. Based on a relational research design, we develop a simple testing procedure that allows us to identify the specific empirical cluster configuration at hand. Based on a survey of labor market, government event, research, and production linkages of 164 firms in the three biomedical industry parks, we conduct statistical tests and conclude that Beijing represents a case of three collaborating clusters, with some elements of integration.
... In general, sustainable regional policies should by no means be simplified as putting together local economic entities specialized in similar sectors in spatially defined industrial districts through top-down administrative manoeuvres. Rather, they should develop multi-layer orchestration mechanisms that encourage economic entities to "work together" in an open network configuration that channels different "local buzz" through "global pipelines" (Bathelt et al., 2004;Mariotti et al., 2010;Li & Bathelt, 2017). The core-periphery features of the network underline where local competition takes place and the niches for new business opportunity creation (Lipparini, Lorenzoni, & Ferriani, 2014). ...
Article
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This exploratory study uncovers how the economic complexity of local production and global connectivity contribute to a subnational region's competitiveness and sustainable development. Addressing the knowledge generation and exchange processes orchestrated by global value chains, we demonstrate that the composition of a subnational region's product space network does not necessarily replicate the same configuration of the country‐level network. By applying social network analysis (SNA) techniques, we analyze the structural features of Quebec's product space network and compare the complexity indices of the province's advantageous sectors with those of Canada. Finally, we conclude with policy insights for sustainable development and suggest future research directions. Cette recherche exploratoire découvre comment la complexité économique de la production locale et de la connectivité globale contribuent à la compétitivité régionale au niveau sous‐national ainsi qu'au développement durable. En adressant les processus de génération et d'échange de connaissances, qui sont orchestrés par les chaînes de valeur mondiales, nous démontrons que la composition du réseau d'espace produit d'une région sous‐nationale ne réplique pas nécessairement la même configuration que celui du niveau national. En appliquant les techniques de l'analyse des réseaux sociaux (ARS), nous analysons les caractéristiques structurelles du réseau d'espace produit du Québec et comparons les indices de complexité des secteurs avantageux de la province avec ceux du Canada. Enfin, nous concluons avec des aperçus sur les politiques au sujet du développement durable et proposons des directions de recherche à venir.
... Indeed, when MNEs avoid co-location in highly specialized areas, they also limit their own access to local knowledge and other agglomeration economies, such as supply networks and qualified workforce. Thus, MNEs managers need to design and implement devices that, on the one hand prevent local leakages of their knowledge then, while previous literature used to consider agglomeration effects generally beneficial, at least until offset by congestion effects and pecuniary diseconomies (e.g., Richardson, 1995;Rosenthal & Strange, 2004), several studies in different fields (international business, global strategy, regional science and economic geography) have increasingly emphasized the ambivalent role of agglomeration in relation to the firm-level attributes and differential abilities to access and generate knowledge (e.g., Alcácer & Chung, 2007;Alcácer, Dezso, & Zhao, 2013;Li & Bathelt, 2018;Mariotti, Piscitello, & Elia, 2010;McCann & Folta, 2011;Rigby & Brown, 2015). ...
Article
Our study provides a quasi–replication of Shaver and Flyer (2000), which was among the first studies that challenged the positive role of agglomeration in determining companies’ location choice and performances, thus changing the way management scholars view companies’ attitude towards agglomeration forces. We employ the same research design, specification and tests, and a different population, to discuss the generalizability of the original study. Building on the framework of Shaver and Flyer (2000), our findings offer intriguing new empirical evidence highlighting the importance of the differential between entering foreign firms and host country firms as a crucial condition in understanding agglomeration forces and adverse selection mechanisms. Our exercise confirms that agglomeration forces act differently on stronger versus weaker multinational enterprises (MNEs). However, we find that stronger MNEs tend to avoid location in highly specialized areas when they are afraid of knowledge leakages towards host country–based rivals that have enough absorptive capacity to benefit and improve their competitive advantages. Managerial implications are quite relevant. Indeed, when MNEs avoid co–location in highly specialized areas, they also limit their own access to local knowledge and other agglomeration economies, such as supply networks and qualified workforce. Thus, MNEs managers need to design and implement devices that, on the one hand prevent local leakages of their knowledge and, on the other, do not hinder their access to local unique knowledge and resources.
... It has been recently shown that the influence of the 'cluster-of-origin' is far more important than that of the 'country-of-origin' in explaining firms' investment location choices (e.g. Li & Bathelt, 2017;Turkina & Van Assche, 2018), and that localised regional and cluster networks affect the shape of global urban networks (Bathelt & Li, 2014). ...
Article
The transformations in the worldwide division of labour brought about by globalisation and technological change have shown an unintended negative effect, particularly evident in advanced economic systems: uneven spatial distribution of wealth and rising within-country inequality. Although the latter has featured prominently in recent academic and policy debates, in this paper we argue that the relevance of connectivity (here proxied by foreign capital investments, FDI) for regional economic development is still underestimated and suffers from a nation-biased perspective. As a consequence, the relationship between the spatial inequality spurred by the global division of labour and the changes in the structural advantages of regions remains to be fully understood in its implications for economic growth, territorial resilience and industrial policy. Furthermore, even though connectivity entails bi-directional links – i.e. with regions being simultaneously receivers and senders – attractiveness to foreign capital has long been at the centre of policy attention whilst internationalisation through investment abroad has been disregarded, and sometimes purposely ignored, in regional development policy agendas. We use three broad-brushed European case studies to discuss some guiding principles for a place-sensitive regional policy eager to integrate the connectivity dimension in pursuing local economic development and territorial equity.
... The second paper, by Li and Bathelt (2018), establishes and analyzes a database of 3,500 investment cases within and between Canada and China to investigate the location strategies of multisite firms in investment decisions at the metropolitan level. By integrating research from IB studies and economic geography, they combine a knowledgebased understanding of MNEs and industrial clusters. ...
Article
IB scholars have long studied the multinational enterprise (MNE) and now recognize that its ability to capture value stems from its control of bottleneck assets. In contrast, economic geographers and regional scientists have largely focused their attention on the locations within which economic and business systems operate. In this article, we draw on both these literatures. We emphasize that the MNE’s integration of upstream and downstream strategic considerations to maximize its control of bottleneck assets implies an optimal geographic footprint. This optimal footprint is typically asymmetric, with a spatial scale that varies dramatically across the different activities of the value chain. Upstream innovation processes are likely to be based on highly local considerations like the availability of specialized resources and collocation advantages. In contrast, downstream sales and marketing processes are likely to driven by imperatives of high volume and global reach. Further, in the current fast clockspeed business environment, the location and nature of bottleneck assets are likely to change rapidly and unpredictably, making organizational flexibility a crucial MNE capability.
... Ashenbaum and Maltz (2017) also develop a conceptual framework of purchasing-logistic integration (PLI) which will be useful and help to promote the performance of suppliers. Jazairy, Lenhardt, and Haartman (2017), Li and Bathelt (2017) investigated the location strategies of Canadian and Chinese MNCs in international and domestic investment decisions at the metropolitan level. And, Dobler et al. (2014), Maas et al. (2014), Ko and Liu (2017) investigated the environmental strategy for SMEs to keep sustainable competitive advantages. ...
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This study empirically analyzes the persistence of the performance for the Taiwanese logistic company. It is the first study to address the hot hand effect on the performance of logistic stations. Generally, the well-performed stations (Winner) will still have a better performance in the following period; the poor-performed stations (Loser) will stay in the worst group. Moreover, we find there is a strong evidence of location advantage for the business stations which supports the discussion of Hernández and Pedersen. It reveals that a non-metropolitan station is well performed rather than the metropolitan station. Either to increase the number of cargo or to decrease the number of workers will promote the performance of the company. Our empirical results can also be extended to the logistic companies in the emerging markets and transition economies. Policy-makers can provide some incentives to make the logistics industry more vigorous development and create economic prosperity. © 2018 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.
... From a geographical perspective, clusters generate more specialized knowledge in their main industries than in other non-specialized areas, particularly tacit knowledge [63], and it is efficiently spread locally [64]. Furthermore, the mobility of human capital between firms fosters knowledge sharing within the cluster [65]. ...
Article
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Research into entrepreneurship has gradually changed its perspective over recent decades, becoming a very relevant research topic. In the last few years, various lines of research have been developed to find new explanatory factors of entrepreneurial propensity in specific socioeconomic and institutional contexts, among which we can highlight local territorial agglomerations. The main objective of the study is to offer new knowledge about the factors that influence the entrepreneurial capacity of food and beverage clusters using different secondary sources. To reach this objective, we analyze how the degree of agglomeration, institutional thickness, and knowledge affects new companies created in the last five years within the 37 food and beverage clusters in Spain. Multiple regression results show that company agglomeration and the presence of supporting institutions positively influence entrepreneurial capacity in these clusters. However, available knowledge has a negative influence on entrepreneurial capacity in these specialized environments.
... Even though the importance of geographical proximity for knowledge flows has been questioned (Tallman and Phene, 2007), Li and Bathelt (2018) present empirical evidence of MNEs strategically targeting these local technology clusters for R&D FDI. Krenz and Gehringer (2015) argue that the intensity of R&D activities in these clusters motivates the decisions of MNEs to settle in these specific locations, for instance in the border area with Germany in Poland. ...
Article
Purpose This paper addresses the geographical dimension of cross-border knowledge integration, expressed as the co-invention of patent filings and investigates the siting of patenting activities by major US corporations in China. Most importantly, the study looks into the patterns of international co-invention or the links of these locations to headquarters and other company subsidiaries. Design/methodology/approach The study explores the cases of six US multinationals that file international patent applications in China. The applications were analyzed based on the composition of invention teams and the locations of inventors. Findings The co-invented patent filings by US multinational enterprises (MNEs) in China demonstrate a high degree of US–Chinese subsidiary collaboration. Links with other subsidiaries are marginal, and at the same time, high levels of sole patenting by inventors in China point to competence-creating research and development (R&D) activities taking place. Practical implications The lack of subsidiary-subsidiary collaboration, especially subsidiaries in other emerging markets, indicates a less diversified strategy of leveraging internal networks of knowledge. This also implies that Chinese subsidiaries still lack attractiveness as partners in subsidiary-subsidiary co-invention. Only two companies in our sample, Procter & Gamble and Intel, demonstrate a highly diversified, integrated and transnational pattern of innovation management. Originality/value The paper contributes to the contextual understanding of the rich landscape of R&D activities of major US MNEs in China. By exploring these cases, the paper identifies a number of trends. First, the R&D activities in this sample are highly concentrated in technological clusters located in Beijing and Shanghai. Technological clustering is an important advantage of the innovation landscape in emerging markets. Second, the paper underscores the importance of differentiating between different types of co-invention. The patent applications in this sample tend to unite inventors mostly from the US and China, and so multi-country applications involving subsidiaries in other countries are rare. Thus, the level of integration outside the center-host bandwidth is low. However, Chinese subsidiaries demonstrate high levels of autonomy by filing single-country applications, which implies that they are building their own research identity.
... MNEs also prefer to locate R&D and design activities in global cities, as shown, for example, by Castellani and Lavoratori (2017). At the cluster level, Li and Bathelt (2018) find that knowledge-intensive firms are more likely to locate in clusters, both at home and abroad. Thus, MNEs leverage local knowledge pools by strategically locating affiliates across clusters. ...
Article
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We explore the public policy implications of two new, significant, and inter-related global phenomena. First, the rising share of services, particularly innovation-driven digital and knowledge-based services, in foreign trade and multinational enterprise activity; and second, the increasingly important role of global cities as home and hosts to these activities. Our framework distinguishes between national economic policies to promote trade and FDI, referred to as economic diplomacy, and comparable policies originating in cities, referred to as city diplomacy. National economic diplomacy has traditionally promoted trade and investment in goods, often through trade agreements and promotion agencies, and we explore the limitations of these tools as trade in services becomes more important. However, we also note that trade in services, particularly innovation-driven services, is concentrated in global cities, and traded between them, often within MNEs. We conclude that national policies on trade and investment cannot be divorced from innovation and knowledge strategies, and that these strategies cannot be divorced from cities. We emphasize that national economic diplomacy should be better aligned with city diplomacy. We also discuss how the transition to stronger city diplomacy may have consequences for firms and their strategies for corporate diplomacy.
... However, it can be argued that this interaction may be difficult to measure if we look at how MNEs shape globalization from the GVC standpoint. We know that MNEs are the drivers of GVCs and consequently knowledge transfer (Li & Bathelt, 2018). What we do not know is the mechanism in which GVCs quantitatively drive globalization through knowledge transfer (Bems & Kikkawa, 2020). ...
Preprint
This is a theoretical essay piece originally submitted as a term paper requirement for an MSc Course at HEC Montreal.
... Despite recent economic geography contributions emphasizing the influence of the 'cluster-of-origin' over that of the 'countryof-origin' in explaining MNC investment location choices (e.g. Bathelt and Li, 2014;Li and Bathelt, 2017), the vast literature on agglomeration economies and spillover mechanisms has downplayed the role of connectivity through, especially outward, FDI in the dynamics of regional specialisation and comparative advantages. Recent academic work in the context of smart specialisation strategies emphasises the crucial link between regional internationalisation and innovation upgrading (Uyarra et al., 2014;Radosevic and Stancova, 2018;Barzotto and De Propris, 2018). ...
Article
This article explores the role of subnational geography in the analysis of the consequences of Outward Foreign Direct Investment (OFDI) for workers performing different typologies of jobs. We qualify jobs according to their knowledge content, degree of tradability and response to agglomeration economies. While the former two dimensions are key to signal the intensity to OFDI exposure of different typologies of jobs, the latter contributes to explain the unequal spatial distribution of benefits and losses from OFDI in terms of job creation/destruction. We theorise areas that are more severely exposed to OFDI experience job losses in routine occupations, whereas they do not necessarily benefit from job creation in non-routine jobs. To test our hypothesis, we make use of a balanced panel dataset at the local labour market level, exploiting variations in OFDI exposure and in the job composition of local areas. Our findings—robust to numerous checks, including unobserved global and local trends—indicate that job losses concentrate in regions that were more exposed to OFDI based on their initial industry mix, and affect individuals performing mainly routine tasks. In these same areas, however, no significant effects are found when looking at job creation in non-routine occupations.
... The literature on knowledge connectivity has emphasized the different types of linkages that lead firms can use to tap into foreign knowledge pockets (Lorenzen & Mudambi, 2013). They can build organization-based pipelines by setting up foreign subsidiaries or formal inter-firm linkages (Li & Bathelt, 2018;Turkina & Van Assche, 2018). They can also build individual-based linkages through global mobility of inventors and experts. ...
Article
Global value chains (GVCs) have revolutionized production processes and many companies no longer produce goods and services entirely in one single country or within their own organizational boundaries. Through offshoring and outsourcing, value chains are sliced up and activities are dispersed to locations and actors where they can be produced or executed most efficiently. The fine slicing of GVCs also implies that innovation activities can be geographically dispersed and separated from other GVC activities. However, there have been inconsistent arguments on the impact of this dispersion on innovations and on the effect of innovations on GVC activities, as research on the topic has been sporadic, inconclusive, and fragmented. Thus, this paper conceptually discusses the nature of innovation in GVCs by reviewing literature and raises important questions that should be addressed. It also outlines a variety of possible research directions and future research foci that can and should be taken to develop the field.
... Multilocational knowledge sourcing strategies are being adopted by an increasing number of organizations, extending the number of locations in which they carry out high value-added activity (Mudambi, 2008;Dunning, 2013;Forsgren, 2017). These locations are target rich in the sense that they tend to be relatively dense clusters of knowledge production (Berry, 2015;Li and Bathelt, 2018) with high potential for agglomeration externalities (Alcacer and Chung, 2014;Jindra et al., 2016). They are often well-connected global city-regions (Goerzen et al. 2013;Iammarino and McCann, 2013;Castellani et al., 2021). ...
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A growing body of research in economic geography, international business management and related fields focuses on geographies of knowledge sourcing. This work examines the organizational structure of innovation activities within the firm, the mechanisms by which knowledge is extracted from various external sources and the geography of these different activities. We augment this literature by exploring knowledge sourcing within multilocational firms operating in the US using a unique dataset matching patent records to firm-level ownership and geographical data. The results add value to existing research in three ways. First, the establishments of multilocational corporations are shown to produce different kinds of knowledge in different locations. Second, the patents generated within a firm's establishments are linked to the knowledge stocks of the cities where they operate, supporting a vision of geographical knowledge sourcing. Third, the complexity of knowledge produced within the firm as a whole is positively related to the number of establishments in which multilocational firms undertake innovation activities. In sum these data suggest that multilocational firms distribute their innovation activities across locations in order to secure access to local pools of tacit knowledge. The complexity value of firms' knowledge production is enhanced as a result of this spatial strategy.
Article
Research Summary This article examines how multinational enterprises (MNEs) leverage knowledge across clusters. Based on the geographical sources and the contextuality of knowledge, we construct a typology of four MNE knowledge strategies across space: replicating, scouting, connecting, and integrating, and take into consideration their spatial, industrial, and leadership contexts. A fuzzy‐set qualitative comparative analysis of 49 pairs of headquarters‐subsidiary linkages between Canada and China suggests that replicating strategies occur in cluster‐to‐non‐cluster contexts or in fields with a knowledge gap between the two countries, whereas scouting strategies are typical in non‐cluster‐to‐cluster investments. Connecting and integrating strategies are focused on cluster‐to‐cluster contexts. We also find that while connecting occurs in fields where knowledge is locally bounded, integrating takes place in nonlocally bounded contexts. Finally, scouting and integrating strategies are associated with home nationals as subsidiary leaders. Managerial Summary How do multinational enterprises (MNEs) transfer knowledge over space between clusters and between other locations? To explore this question, we construct a typology of four MNE knowledge strategies (replicating, scouting, connecting, and integrating) and examine the spatial, industrial, and leadership conditions of each. By examining 49 headquarter‐subsidiary linkages between Canada and China through detailed interviews, we find that replicating strategies occur in cluster‐to‐non‐cluster contexts or industries with a knowledge gap between the two countries, whereas scouting strategies are typical in non‐cluster‐to‐cluster investments. Connecting and integrating strategies are focused on cluster‐to‐cluster contexts. We also find that while connecting occurs in fields where knowledge is locally bounded, integrating dominates where this is not the case. Finally, scouting and integrating strategies are associated with home nationals as subsidiary leaders.
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A central challenge in current cluster policy discussions is how to build innovative clusters that are resilient to external shocks. We examine the Montréal aerospace industry to explore cluster resilience. The case is interesting since it recently experienced two industrial shocks: Boeing 737 MAX crashes in 2018 and 2019 and Bombardier’s sell-off of its flagship CSeries in 2020. Surprisingly, in the wake of the two radical disruptions, the cluster fared quite well in terms of employment and export performance. Using the method of abductive reasoning to find a-matter-of-course explanation of the surprising case, we observe that a low speed of aircraft development and production – a low industry clockspeed – stabilizes local production and knowledge networks through five mechanisms: long-term contracting, R&D cost sharing, production planning, social networking, and technology solidifying. Inspired from the case, we theoretically explore how fast (e. g., fashion and cellphones or the hare) and low (e. g., shipbuilding and aerospace or the tortoise) industry clockspeeds lead to different configurations of firm relations and are thus associated with different types of economic resilience.
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In today’s knowledge economy, clusters are a key driver of a country’s competitiveness. Yet a cluster’s technological base is now more than ever influenced by constituent firms’ actions to tap into distant knowledge sources. Drawing on a social network perspective, and distinguishing between horizontal versus vertical organization-based linkages, we explore the effects of a cluster’s connectedness to foreign locations on its innovation performance. We show that improvements in horizontal and vertical connectedness both stimulate a cluster’s innovation performance, but that their relative effects vary across cluster types. Innovation in knowledge-intensive clusters disproportionately benefits from enhancements in their constituent firms’ horizontal connectedness to foreign knowledge hotspots. Innovation in labor-intensive clusters mostly gains from stronger vertical connections by their firms to central value chain players abroad. We discuss the implications of our findings for research on global knowledge sourcing and cluster upgrading.
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Where do businesses source the capabilities that influence their diversification? From the resource-based perspective, capabilities are located within the firm. For many economic geographers, capabilities are place-based and flow between firms in local areas. Others claim the capabilities that count emerge from non-local collaboration. The value added of this paper is a firm–establishment–patent dataset that helps identify the sources of capabilities regulating technological diversification in the establishments of multi-locational firms. Results show that capabilities located within establishments themselves are most important to the process of diversification, followed by firm capabilities and then place-based capabilities.
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The authors examine intercluster dynamics among rival global clusters on monthly counts of patents, startups, and new product commercializations between 1999 and 2014 while controlling for numerous exogenous variables. Results show that rival innovation clusters facilitate rather than hinder each other’s growth due to resources complementarities. Reverse fertilization occurs from emerging to developed clusters, contrary to the received wisdom. This study is the first to show intercluster dynamics as important drivers of cluster growth. To explain the counterintuitive findings, the authors draw upon the coopetition view which suggests mutually beneficial growth across all rival clusters rather than zero-sum gains.
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The spread of protectionist policies and the COVID‐19 pandemic force policymakers and managers to fundamentally rethink the relationship between location and strategy. We examine this location‐strategy interplay through a structure‐agency perspective by investigating how the economic landscape shapes and, simultaneously, is shaped by firm strategies. Increasing spatial disparity and diversity of innovation and wealth in clusters and city‐regions create both tremendous challenges and opportunities for multinational enterprises to strategically leverage knowledge over space. Locational choices and actions of multinationals, in turn, affect regional economic development paths and geographies of innovation. We argue for deep dialogue and collaboration between economic geography, international business and strategy to untie the knots in the intricate interplay between location and strategy and solve the grand challenges in our turbulent age. The wide spread of protectionism and the COVID‐19 pandemic have disrupted global value chains unprecedently, forcing policymakers and firm managers to rethink the relationship between business strategies and locations. We suggest that this relationship can be understood in a bilateral way. The concentration of innovation and economic activities in city‐regions and clusters creates big challenges but also tremendous opportunities for multinational enterprises. Multinationals need to direct knowledge across space but also have to deal with local resistance and opposition. The choices and actions of these firms are shaped by and, simultaneously, influence spatial patterns of economic activities. We argue for deep collaboration between economic geographers and international business scholars to solve the grand challenges for business, community and society in our turbulent time.
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The subject of this work is a future development of a post-revenue model that will be based on innovative sales strategies. The industry in focus is global automotive industry. This paper gives an overview of why it is necessary to adopt a new business model and how much it is actually a requirement of the global automotive market itself. The automotive industry is a highly cyclical industry because it depends heavily on the availability of investments at some point, and for this reason, the corporate well-designed sales strategy is the primary tool for maintaining the level of revenues and their growth in the industry, such as automotive. The industry is highly turbulent and has faced severe changes in the recent decade where clients expect more service-oriented approach by major manufacturer as well as by other stakeholders involved in the automotive value chain. Thus, stakeholders have to innovate constantly to keep clients satisfied. In this respect, in our paper we highlight the most important aspects to be considered by business counterparts relevant to the automotive industry companies in order to build future sustainable business operations. We present the factors that need to be examined, especially in the context of emerging markets in Europe and provide directions for future research.
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Knowledge generation is often viewed as a direct outcome of spatial proximity or other social affinities between firms. In rejecting structural interpretations, this article emphasizes the crucial role of agency in orchestrating knowledge transfer and generation over space. We explore how firms strategically leverage the uneven geography of knowledge in international investments and identify four spatial knowledge strategies according to the direction of knowledge flows and mode of connection: knowledge replicating, scouting, connecting, and integrating. Drawing from a relational perspective, we develop four propositions to investigate how these strategies are configured in specific spatial settings. It is argued that replicating and scouting strategies occur from clusters to nonclusters and from nonclusters to clusters, respectively, while connecting and integrating strategies take place in cluster-to-cluster contexts. Adopting fuzzy set Qualitative Comparative Analysis (fsQCA), an investigation of forty-nine headquarters-subsidiary linkages between Canada and China substantiates the four knowledge strategies and their spatial configurations, and shows how spatial structure and agency are fundamentally intertwined and influence each other.
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Challenging populist views of outward foreign direct investments (OFDIs) that suggest they move prosperity abroad, this article builds a model suggesting that OFDIs support urban-regional income levels due to (1) labor; (2) knowledge; and (3) multiplier, spillover, and intermediate input effects. In a panel study of median incomes in US urban regions between 2005 and 2013, we first establish a base model that measures income as a function of local factor endowments (high skill levels, fast-growing and technologically sophisticated industries, and urban scale effects). This base model is highly significant. In the next step, we extend this model by adding our main variables of greenfield inward and outward investment intensity, and finally we integrate other indicators that measure the geographic, industrial, and functional composition of OFDIs. While the results for other investment-related indicators are mixed, the main investment variables are highly significant, thus providing strong support that greenfield OFDIs act as a catalyst of urban-regional income development.
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Both industrial agglomeration and inward foreign direct investment (IFDI) are drivers of China’s economic development. However, their distributions are unbalanced. Both are large in eastern regions, similar to the distribution of the GDP in China. It indicates there may be a relationship between them. Based on it, the paper selects fixed effects model to analyse the relationships among GDP, IFDI and the industrial agglomeration in China regarding different regions and time horizons, and finds that on the whole, the industrial agglomeration and IFDI do promote the regional economic growth stably during different periods, while both are much stronger in the western regions and central regions. The paper also finds the coefficient of their interaction item is significantly negative, which implies the transmission mechanism between IFDI and industry agglomeration is inefficient. To promote the balanced economy development of different regions, the paper suggests that China should improve the quantity and quality of industrial agglomeration and the IFDI to increase the coordinated development of both in different regions.
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As a social and economic phenomenon, corruption has attracted much scholarly attention in the field of international business. However, studies concerning corruption generally remain at the national level, overlooking heterogeneity in institutions at the subnational level. This study zooms in on subnational corruption to examine its influence on the performance outcome of foreign firms, as well as the mitigation strategies by foreign firms through building mutual dependence with local governments. Analyzing data on foreign firms operating in China between 2011 and 2013, we find that subnational corruption level is negatively associated with the financial performance of foreign firms. This negative association is weakened by foreign firms’ export ratio and local experience.
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This paper examines the dynamics of the location patterns of the foreign direct investment(FDI)subsidiaries in manufacturing and service sectors across regions in a developing economy before and after the accession of the European Union in 2004. The data at the NUTS level 2 on regions in Poland is analyzed employing the revealed location advantage (RLA) index for industrial specialization (RLAis) of the regions. The study tests the concentration patterns of industrial sectors along with the industrial specialization level of regions’ participating foreign enterprises across all regions of Poland. The findings allow answering for the presented hypothesis testing the level of industrial specialization across regions and its impact on narrowing industrial specialization, wages and the level of R&D investment. The results determine that the location of foreign firms in service-related industries is concentrating mostly in the largest agglomerations with the presence of large markets and universities. While, also, several regions seem to be able to narrow their manufacturing specializations, they generally locate at, or near, the legacy centers of those industrial sectors. This provides answers for, and confirms the raised hypothesis and generally follows the existing theoretical path of the developed economies. The study, also, shows that Polish regions attracting a higher number of foreign service-related investments also seem to increase their industrial specialization in select manufacturing sectors that can increasingly attract R&D investment.
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Two classic perspectives of knowledge generation across space can be distinguished: one that focuses on localized knowledge networks in communities or clusters and another that investigates how innovation is linked to global knowledge networks of multinational enterprises. The former view has been prevalent in economic geography, the latter in international business. By integrating both perspectives, this paper focuses on the processes of how firms extend their knowledge networks from local to global settings. It develops a four-stage model of building cross-border knowledge pipelines, involving site selection, cross-border knowledge facilitation, local embedding, and cross-border knowledge generation. The model emphasizes the significant role of knowledge facilitators in building cross-border knowledge pipelines and is substantiated in a typical case study of Canadian firms in China.
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We examine how institutional factors influence the strategies entrepreneurial ventures use as they seek the knowledge they need to perform and compete. With a focus on economic and ecosystem development, we propose a framework of interrelations between two principal knowledge-search strategies, their interactions with varying levels of institutional development, and the joint effects on venture performance. We utilize a sample of 1,470 entrepreneurial ventures to examine two hypotheses. Results, based on hierarchical regression, distributed lag analyses, and several assumption and robustness checks show that knowledge-search strategy interrelations are complementary when institutional development is high but substitutive when institutional development is low. We execute a post hoc analysis using separate data sources to replicate these results and strengthen our findings. Finally, we discuss implications for entrepreneurial practitioners, policymakers, and scholars.
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This paper examines the dynamics of the location patterns of the foreign direct investment(FDI)subsidiaries in manufacturing and service sectors across regions in a developing economy before and after the accession of the European Union in 2004. The data at the NUTS level 2 on regions in Poland is analyzed employing the revealed location advantage (RLA) index for industrial specialization (RLAis) of the regions. The study tests the concentration patterns of industrial sectors along with the industrial specialization level of regions’ participating foreign enterprises across all regions of Poland. The findings allow answering for the presented hypothesis testing the level of industrial specialization across regions and its impact on narrowing industrial specialization, wages and the level of R&D investment. The results determine that the location of foreign firms in service-related industries is concentrating mostly in the largest agglomerations with the presence of large markets and universities. While, also, several regions seem to be able to narrow their manufacturing specializations, they generally locate at, or near, the legacy centers of those industrial sectors. This provides answers for, and confirms the raised hypothesis and generally follows the existing theoretical path of the developed economies. The study, also, shows that Polish regions attracting a higher number of foreign service-related investments also seem to increase their industrial specialization in select manufacturing sectors that can increasingly attract R&D investment.
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After a century of inter-regional income convergence, average incomes have been diverging between U.S. cities since the 1980s, calling for new policy agendas. We argue that policy research should move beyond its current focus on the effects of inter-city divergence from technological change, migration, and trade, to include the effect of outward foreign-direct investments (OFDIs). This paper suggests that OFDIs have contributed to income divergence across U.S. cities. We argue that OFDIs can positively contribute to average income levels in investing (home) cities through labor, knowledge, multiplier and trade effects – a relationship that has not been systematically investigated in prior research. It is suggested that regional income levels and OFDIs are subject to a virtuous co-evolutionary process for high-income cities while having weaker effects for lower-income cities. This is tested with a combination of fixed-effects panel regressions and quantile regressions, before and after the 2008/2009 financial crisis. Our key finding is that, while OFDIs have a positive effect on regional income levels in the post-crisis period, their effect is largest for cities with incomes around the 60th to 80th percentiles of the income distribution. This suggests that the benefits of OFDIs primarily accrue to already successful city-regions, allowing them to further their pre-existing lead.
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We explore how knowledge-based connections to domestic and foreign locations affect the technological scope of firm innovations. Inspired by a blend of Economic Geography and International Business perspectives, we propose a theoretical framework that distinguishes between domestic subnational differences and cross-national spatial heterogeneity. Further, we combine the Penrosean view of managerial capabilities with the attention-based theory of the firm. Analyzing a sample of US-based firms between 1990 and 2006, we show that both domestic and international knowledge connectedness affect the technological scope of firm innovations, but their effects are different. The breadth of international knowledge connectedness appears to be positively associated with the technological scope of firm innovations. However, the breadth of domestic knowledge connectedness positively contributes to the technological scope of firm innovations up to a certain point, beyond which the bounded rationality of managers constrains firms’ ability to further leverage subnational heterogeneity. Thus, domestic search is more likely to be challenged by limited managerial bandwidth. Lastly, domestic and international knowledge connectedness significantly interact with each other to explain the technological scope of firm innovations.
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We show how the initial subnational entry location of foreign multinational enterprises (MNEs) in China influences their subsequent within-country location choices and expansion speed. We distinguish between MNEs that establish their first subsidiary in co-ethnic cores – dense agglomerations of other firms from the same country of origin – and MNEs that locate their first subsidiary in the periphery, i.e., outside of these co-ethnic cores. To identify co-ethnic cores in China, we employ a geo-visualization methodology, which draws the boundaries of cores organically and dynamically over time. We contrast our findings with the prevailing approach of using static administrative boundaries for identifying agglomerations. Our results provide evidence of path dependency, in that (a) entry through subnational locations with strong co-ethnic communities is followed by expansion into other locations where co-ethnic communities are present, and that (b) entry through co-ethnic communities accelerates the pace at which MNEs establish additional subsidiaries in China. We also find that co-ethnic community effects continue to influence within-country MNE activities over time, despite a host of economic, institutional, and investment developments. Journal of International Business Studies (2017): http://link.springer.com/article/10.1057/s41267-016-0060-x/fulltext.html
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Spurred by the classic work of Dunning, MNE location has become the focus of a growing body of research in the field. In this paper we argue that international business (IB) research examining the spatial dimension has serious weaknesses, stemming from its traditional assumption of the country as the location unit of analysis. While border-crossing remains the key research context of IB, placing it within a general spatial framework that recognizes both international and subnational spatial heterogeneity opens up vastnew vistas for research. Analyzing MNEs as border-crossing multi-location enterprises allows the researcher to distinguish between (discrete) border effects and (continuous) distance effects and undertake a more fine-grained analysis of location. Within such analysis national borders may appear as qualitative discontinuities in space, that is, points at which spatial heterogeneity changes abruptly. However, subnational spatial heterogeneity is often the characteristic that drives firm strategy as MNEs decide to locate in parfiicular agglomerations and not at random locations within a country. The complex firms that lB scholars study typically include multiple units within the same country, so that a complete analysis requires considering both subnational distance effects as well as international border effects.
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Analyzing the comprehensive 35-year patent data set associated with the Detroit auto cluster we confirm that innovation in clusters can increase in spite of a long-term decline in manufacturing activity. The “stickiness” of local knowledge is sustained by: (i) increasing technological specialization at the local level and (ii) growing connectedness to global centers of excellence. The very forces that bring about the decline in manufacturing in a cluster sustain their position as a global center of innovative excellence.
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Research and development (R&D) internationalization is on the rise for advanced economy multinationals (AMNEs) as well as emerging economy multinationals (EMNEs). We study EMNE R&D internationalization by comparing it to that by AMNEs in the context of an emerging, knowledge-intensive industry. We find that these two are fundamentally different processes. While the internationalization of AMNEs’ R&D activities can largely be explained in terms of the twin strategies of competence exploitation and competence creation, EMNE R&D internationalization is rooted in the firms’ overall catch up strategy to get on par with industry leaders. An in-depth comparison of knowledge flows reveals that within AMNEs, headquarters often serves the primary source of knowledge for R&D subsidiaries. In contrast, within EMNEs, headquarters accesses knowledge from R&D subsidiaries in advanced economies for innovation catch-up. Within this dichotomy, the innovative capabilities of EMNE headquarters develop more slowly and with greater difficulty than those of AMNE subsidiaries.
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This article first traces the changing world economic scenario for international business over the past two decades, and then goes on to examine its implications for the location of foreign direct investment and multinational enterprise activity. It suggests that many of the explanations of the 1970s and early 1980s need to be modified as firm-specific assets have become mobile across natural boundaries. A final section of the article examines the dynamic interface between the value-added activities of multinational enterprises in different locations.
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The essence of modern economic growth is the increase in the stock of useful knowledge and the extension of its application. Since the origins of technical and social innovations have never been confined to the borders of any one nation, the economic growth of all countries depends to some degree on the successful application of a transnational stock of knowledge (Kuznets, 1966). In other words, the economic growth of every nation is inextricably linked to the successful international transfer of technology. Nevertheless, economists have been remarkably slow in addressing themselves to the economics of international technology transfer. The result is that “at both the analytic and factual level very little is known about the international transfer of knowhow” (Reynolds, 1966). © 2003 by World Scientific Publishing Co. Pte. Ltd. All rights reserved.
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This article first traces the changing world economic scenario for international business over the past two decades, and then goes on to examine its implications for the location of foreign direct investment and multinational enterprise activity. It suggests that many of the explanations of the 1970s and early 1980s need to be modified as firm-specific assets have become mobile across natural boundaries. A final section of the article examines the dynamic interface between the value-added activities of multinational national enterprises in different locations.
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Pursuing a nodal (i.e., subsidiary) level of analysis, this paper advances and tests art overarching theoretical framework pertaining to intracorporate knowledge transfers within multinational corporations (MNCs). We predicted that (i) knowledge outflows from a subsidiary would be positively associated with value of the subsidiary's knowledge stock, its motivational disposition to share knowledge, and the richness of transmission channels; and (ii) knowledge inflows into a subsidiary would be positively associated with richness of transmission channels, motivational disposition to acquire knowledge, and the capacity to absorb the incoming knowledge. These predictions were tested empirically with data from 374 subsidiaries within 75 MNCs headquartered in the U.S., Europe, and Japan. Except for our predictions regarding the impact of source unit's motivational disposition on knowledge outflows, the data provide either full or partial support to an of the other elements of our theoretical framework. Copyright (C) 2000 John Wiley & Sons, Ltd.
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We began this project with three research questions: What competitive advantages do EMNEs leverage as they internationalize, and how are those advantages shaped by the home-country context? How do EMNEs internationalize, and why? And, how is the rise of EMNEs affecting global industry dynamics? Underlying those questions was the theoretical question of whether existing IB frameworks are adequate to explain EMNE behavior, and if not, how they should be modified or extended. The studies in Part II show clearly that EMNEs are not a homogeneous group by any means. The countries from which they hail, the industries in which they operate, the competitive advantages they exploit, the markets they target, and the internationalization paths they follow vary quite widely. The evidence does not permit sweeping generalizations about EMNEs nor about how they are different from MNEs that came before, because the latter is also a heterogeneous group. Equally important, EMNEs have internationalized in a different international context than MNEs that came before, including even Japanese and Korean MNEs, and this makes inter-temporal comparisons even more difficult. Since the 1990s, the international policy environment and the technological environment have changed profoundly. Domestic and foreign markets were more open in this period than in earlier decades, following the collapse of Communism, the conclusion of the Uruguay Round trade deal, and the creation of the WTO.
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This article provides an overview of the key insights resulting from recent international business research on the interactions between location advantages and the competitiveness of multinational enterprises (MNEs). It consists of four main sections. First, the evolution of the location advantage concept in the international economics literature is discussed. Here, it appears that the international economics literature has substantially broadened its analytical scope in the last few decades. However, the field of international business research had gone even further in its analysis of the interactions between location and MNE competitiveness because of its in-depth focus on the actual behaviour of MNEs. The complex nature of location advantages for MNEs is discussed in more detail in the second section. The third section describes the intellectual foundations of a spatial analysis of MNE activities. Finally, the fourth section discusses the relative contribution of home country specific advantages (CSAs) and host CSAs to MNE competitiveness.
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This article outlines a model of regional cluster development in which the clusters and foreign multinational enterprises (MNEs) are interdependent. Such clusters are characterized by a strong or dominant presence of foreign MNEs as well as a strong contribution by cluster-based subsidiaries to the overall strategy of the MNEs. The case of the Hong Kongfinancial-services cluster is used to demonstrate that interdependent clusters provide types of investment opportunities, particularly for “marketplace-seeking” and “information-seeking” investments, and benefits to foreign multinationals that go beyond those usually contemplated in the MNE literature, while the locations housing such clusters receive benefits that also go beyond those usually contemplated. The article concludes with implications for economic policy, firm strategy, and further research on the interaction between clusters and MNEs.
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This paper advances strategic management research by taking a close look at the reasons, procedures, and results of cluster identification methods, focusing on a density-based algorithm that organically define clusters from actual locations of economic activities. Despite being a popular research topic and analytical tool, geographic clusters are often studied with little consideration given to the underlying economic activities, the unique cluster boundaries, or the appropriate benchmark of economic concentration. Our goal is to increase awareness of the complexities behind cluster identification, and to provide concrete insights and methodologies applicable to various empirical settings. The method we propose is especially useful when researchers work in global settings, where data available at different geographic units complicates comparisons across countries.
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This article argues that local knowledge building and global (nonlocal) knowledge-accessing practices in economic development are intrinsically interwoven. They generate fundamental feedback loops, which are channeled through and lead to ongoing knowledge circulation. To better understand the nature of the specific mechanisms and conditions underlying these processes, three key areas of research are identified for current and future research. These are related to (i) creative agents and the nature of local creative processes, (ii) community formation and local creativity from ideas to market penetration and (iii) temporary gatherings as translocal knowledge platforms.
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In the globalizing knowledge economy firms have become less reliant on local production and market networks and increasingly expand their reach to an international or global scale. The argument of this paper suggests that this has given rise to distinct geographies of knowledge transfers over distance, which rely on periodic or regular temporary face-to-face contacts. While some of these settings of temporary knowledge transfers have existed for a long time, they are now being intensively applied throughout the economy. In this paper we develop a typology of these geographies based on three dimensions that characterize the conditions for knowledge exchange: (i) framing, (ii) cognitive focus and goals, and (iii) trust and risks involved. Based on these variables, we identify three configurations and eight subcategories of knowledge transfers that build upon temporary face-to-face interaction, classified as (1) international community gatherings, (2) international business travel, and (3) transnational network relations. Systematic comparison reveals that with growing uncertainty in economic interaction and with increasing commitment between the agents, trust-based linkages tend to become more important, and the number of interacting agents declines, while the frequency of temporary face-to-face meetings increases.
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Using a network perspective of multinational firms, this article develops conceptions of global cluster networks and global city-region networks that are based on foreign direct investment (FDI) activities. The article first formulates a global cluster-network hypothesis suggesting that multinational cluster firms are more likely to set up new foreign affiliates in other, similarly specialized clusters to keep up with global industry dynamics. Conversely, it is suggested that non-cluster firms are more likely to avoid cluster destinations in their FDIs. Second, it is hypothesized that cluster networks generate connections between city-regions in different countries that are horizontal and vertical in character and thus shape global city-region networks. To test these hypotheses, the spatial patterns of 299 FDI cases from Canada to China between 2006 and 2010 are investigated, generally supporting the hypotheses developed. © The Author (2013). Published by Oxford University Press. All rights reserved.
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This paper explores the globalization of R&D by Japanese industry, examining the scope and nature of Japanese R&D in the United States, the globalization strategies of Japanese firms, and the determinants of the location of offshore R&D facilities. A comprehensive dataset on Japanese R&D in the United States was developed, and field research and survey research were conducted with Japanese firms and R&D laboratories. The findings indicate that Japanese corporations operated 174 stand-alone R&D laboratories in the United States and spent more than $1 billion on U.S.-based R&D in 1990. Japanese R&D investment in the United States is geographically concentrated around leading technology centers and in the Midwest transplant automotive corridor. A large share of Japanese R&D facilities are product development facilities that customize products for the U.S. market and provide technical support to manufacturing. A subset of these facilities, particularly in the automotive sector, is located at or near existing transplant factories. A smaller number of Japanese R&D investments are scientifically oriented basic research facilities, located near major U.S. research centers to secure access to new sources of scientific and technical talent. The findings thus suggest that the globalization of R&D by Japanese corporations is the result of: (1) the globalization of innovation and production, (2) the emergence of new centers of technological innovation and knowledge-intensive production, and (3) the increasing importance of interaction between the sites of innovation and production.
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Using an original dataset of 4,183 former J-1 Visa holders from 81 countries—all of whom had worked in the U.S.—I examine how skilled return migrants, as cross-border brokers, transfer knowledge about organizational practices from abroad to their home countries. I hypothesize that returnees’ knowledge transfer success depends on their embeddedness in both their home- and host-country workplaces and develop and test theory about the organizational and cultural conditions that activate or suppress skilled returnees’ ability to broker knowledge across borders. Findings show that not only do host- and home-country embeddedness increase knowledge transfer success, but they also interact positively. At the organizational level, however, the presence of other returnees in a home-country workplace decreases the positive effect of a returnee’s host-country embeddedness, whereas the similarity of a returnee’s industry background to the home-country industry increases it. At the country level, high xenophobia in a given home country diminishes the positive effect of host-country embeddedness but increases the positive effect of home-country embeddedness. These findings inform an interpersonal perspective on knowledge transfer, contributing to work on brokerage, organizational learning, employee mobility, and the globalization of expert knowledge.
Book
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
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This study reexamines the relationships between corporate diversification strategies and firm performance and suggests that these relationships are related to home country environments. We examined two environmental aspects: factors that facilitate transformational activities and institutions that foster transactional activities. Using a sample of firms from six Western European countries, we found support for the study's central proposition, that home country environment is an important component in the study of corporate diversification strategies.
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Since the 1990s, the Chinese apparel industry in Prato has developed from a few stitching workshops into full-fledged production networks. However, persistent disparity between the Chinese and Italian labor has triggered widespread social tensions. Drawing upon the recent literature of critical labor studies, this paper offers a different perspective to see the disparity in terms of the multiplication of labor across scales. The Chinese labor in Prato is made cheap and flexible by the proliferation of institutional and social borders, which were in turn inadvertently produced by Italian immigration policies, Chinese social norms, and local and regional economic conditions. In particular, the Chinese migrant workers have played an active role in producing social borders and in their own exploitation. Therefore, the labor polarization in Prato can hardly be solved by local institutional arrangements, and Italian trade unions have failed to organize the Chinese migrant labor in Prato.
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Work on clusters during the last few decades convincingly demonstrates enhanced opportunities for local growth and entrepreneurship, but external upstream knowledge linkages are often overlooked or taken for granted. This article is an attempt to remedy this situation by investigating why and how young, single-site firms search for distant sources of complementary competences. The discussion is positioned within a comprehensive framework that allows a systematic investigation of the approaches available to firms engaged in globally extended learning. By utilizing the distinction between problem awareness (what remote knowledge is needed?) and source awareness (where does this knowledge reside?) the article explores the relative merits and inherent limitations of pipelines, listening posts, crowdsourcing and trade fairs to acquire knowledge and solutions from geographically and relationally remote sources.
Book
Introduction 1. Surprising Success 2. Learning the Silicon Valley System 3. Creating Cross-Regional Communities 4. Taiwan as Silicon Sibling 5. Taiwan as Partner and Parent 6. Manufacturing in Mainland China 7. IT Enclaves in India 8. The Argonaut Advantage Appendix A: Immigrant Professional and Networking Associations, Silicon Valley Appendix B: Survey Results: Immigrant Professionals in Silicon Valley Notes References Abbreviations Acknowledgments Index
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This study rests upon the premise that differences in the productivity performance of multinational enterprises (MNEs) stem from variations in their ability to access and combine globally distributed knowledge reservoirs within one organization. Its contribution lies in demonstrating that this important source of variation is determined by (a) the idiosyncratic manner in which the MNE's network of subsidiaries is structured. (b) the international breadth and depth of this network and (c) its location choices in the global landscape. We find that when multinationals spread their operations across many geographical markets, they benefit from knowledge externalities more than when they concentrate their activities in few countries. We further show that the ability to exploit spatially distant knowledge depends not only on idiosyncrasies specific to the MNE, but also on exogenous forces associated with international variations in appropriability regimes and industry-specific technological opportunities. As our study considers how the subsidiaries of the MNE collectively influence the productivity of the entire group, it captures complementarities and synergies within the group, and deepens understanding of how MNE-specific and location bound factors jointly shape performance outcomes.