Factors Influencing MNCs’ Location Decision
Main Article Content
Abstract
The significant growth of international investment in recent decades has led to the creation of a number of theoretical schools explaining this phenomenon and trying to answer the question of why multinational companies (MNCs) choose to locate their foreign direct investment (FDI) at one location not others? What are other factors influencing that choice? Research in this area is derived from two intertwin tradditions: the first is derived from the trade theory and economics of industrial organization and the second is the internationalization process approach associated with Uppsala model. However, both approaches have limitations and important bias. The paper will review these two approaches, analyze and identify the limitations of each approach, and give some suggestions for future research.
Keywords:
FDI, selection decision, FDI location, MNCs.
References
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[37] E. McCann, “Urban Policy Mobilities and Global Circuits of Knowledge: Toward a Research Agenda”, Annals of the Association of American Geographers 101 (1) (2011) 107-130.
[38] J.L. Arregle, P.W. Beamish, L. Hébert, “The Regional Dimension of MNEs' Foreign Subsidiary Localization”, Journal of International Business Studies 40 (1) (2009) 86-107.
[39] J.L. Arregle, T.L. Miller, M.A. Hitt, P.W. Beamish, “Do regions matter? An integrated institutional and semiglobalization perspective on the internationalization of MNEs”, Strategic Management Journal 34 (8) (2013) 910-934.
[2] B.B. Nielsen, C.G. Asmussen, C.D. Weatherall, “The location choice of foreign direct investments: Empirical evidence và methodological challenges”, Journal of World Business 52 (2017) 62-82.
[3] Nguyễn Văn Thắng, Giáo trình thực hành nghiên cứu trong kinh tế và quản trị kinh doanh, NXB. Đại học Kinh tế Quốc dân, Hà Nội, 2014.
[4] P.J. Buckley, T.M. Devinney, T.M. Louviere, “Do managers behave the way theory suggests? A choice-theoretic examination of foreign direct investment location decision-making”, Journal of International Business Studies 38 (7) (2007) 1069-1094.
[5] S.H. Hymer, International operations of national firms, Cambridge, MA: MIT Press, 1960.
[6] J. Johanson, J.E. Vahlne, “The Internationalization Process of the Firm-A Model of Knowledge Development and Increasing Foreign Market Commitments”, Journal of International Business Studies 8(1) (1977) 23-32.
[7] E. Hörnell, J. Vahlne, F. Wiedersheim-Paul, Exports and foreign establishments, Stockholm: Almqvist & Wicksell, 1973.
[8] J.E. Vahlne, F. Wiedersheim-Paul, “Economic distance: Model and empirical investigation”, Export and Foreign Establishments, 1973, pp. 81-159.
[9] J.E. Vahlne, K.A. Nordström, “The internationalization process: Impact of competition and experience”, The International Trade Journal 7 (5) (1993) 529-548.
[10] Y. Kang, F. Jiang, “FDI location choice of Chinese multinationals in East and Southeast Asia: Traditional economic factors and institutional perspective”, Journal of World Business 47 (1) (2012) 45-53.
[11] B. Ramasamy, M. Yeung, S. Laforet, “China’s outward foreign direct investment: Location choice and firm ownership”, Journal of World Business 47 (1) (2012) 17-25.
[12] Y. Kandogan, “Regional foreign direct investment potential of the states within the US”, Journal of Economics and Business 64 (4) (2012) 306-322.
[13] C.L. Rogers, C. Wu, “Employment by foreign firms in the US: Do state incentives matter?”, Regional Science and Urban Economics 42 (4) (2012) 664-680.
[14] G.G. Dess, S. Newport, A.M.A. Rasheed, “Configuration Research in Strategic Management: Key Issues and Suggestions”, Journal of Management 19 (4) (1993) 775-795.
[15] D.A. Kenny, Correlation and causality, New York: Wiley, 1979.
[16] G.J. Bobonis, H.J. Shatz, “Agglomeration, adjustment, and state policies in the location of foreign direct investment in the United States”, The Review of Economics and Statistics 89 (1) (2007) 30-43.
[17] H.H. Hoang, M. Goujon, “Determinants of foreign direct investment in Vietnamese provinces: A spatial econometric analysis”, Post-Communist Economies 26 (1) (2014) 103-121.
[18] B. Esiyok, M. Ugur, “A spatial regression approach to FDI in Vietnam: Province-level evidence”, The Singapore Economic Review, 62 (02) (2017) 459-481.
[19] B.B. Nielsen, S. Nielsen, “A multilevel approach to understanding the multinationality-performance relationship”, The Past, Present and Future of International Business & Management: Emerald Group Publishing Limited, 2010, pp. 527-557.
[20] R. Basile, D. Castellani, A. Zanfei, “Location choices of multinational firms in Europe: The role of EU cohesion policy”, Journal of International Economics 74 (2) (2008) 328-340.
[21] S. Rasciute, E. Pentecost, B. Ferrett, “Firm heterogeneity in modelling foreign direct investment location decisions”, Applied Economics 46 (12) (2014) 1350-1360.
[22] J.L. Arregle, L. Hébert, P.W. Beamish, “Mode of international entry: The advantages of multilevel methods”, Management International Review 46 (5) (2006) 597-618.
[23] S. Hill, M. Munday, “The UK Regional Distribution of Foreign Direct Investment: Analysis and Determinants”, Regional Studies, 26 (6) (1992) 535-544.
[24] J. Taylor, “An analysis of the factors determining the geographical distribution of Japanese manufacturing investment in the UK, 1984-91”, Urban Studies 30 (7) (1993) 1209-1224.
[25] C.C. Coughlin, E. Segev, “Foreign Direct Investment in China: A Spatial Econometric Study”, The World Economy 23 (1) (2000) 1-23.
[26] D.P. Woodward, “Locational determinants of Japanese manufacturing start-ups in the United States”, Southern Economic Journal 2 (1992) 690-708.
[27] K. Head, J. Ries, “Inter-City Competition for Foreign Investment: Static and Dynamic Effects of China’s Incentive Areas”, Journal of Urban Economics 40 (1) (1996) 38-60.
[28] K.E. Meyer, H.V. Nguyen, “Foreign Investment Strategies and Sub-national Institutions in Emerging Markets: Evidence from Vietnam”, Journal of Management Studies 42 (1) (2005) 63-93.
[29] E.G. Lim, “Determinants of, and the Relation Between, Foreign Direct Investment and Growth; A Summary of the Recent Literature: International Monetary Fund”, Available at: https://econpapers.repec.org/RePEc:imf:imfwpa: 01/175/, 2001.
[30] S. Li, S.H. Park, “Determinants of Locations of Foreign Direct Investment in China”, Management and Organization Review 2 (1) (2006) 95-119.
[31] W.H. Davidson, “The location of foreign direct investment activity: Country characteristics and experience effects”, Journal of International Business Studies 11 (2) (1980) 9-22.
[32] B. Petersen, T. Pedersen, “Coping with liability of foreignness: Different learning engagements of entrant firms”, Journal of International Management 8 (3) (2002) 339-350.
[33] B. Ambos, “Foreign direct investment in industrial research and development: A study of German MNCs”, Research Policy 34 (4) (2005) 395-410.
[34] J.I. Galan, J. Gonzalez-Benito, J.A. Zuñiga-Vincente, “Factors determining the location decisions of Spanish MNEs: An analysis based on the investment development path”, Journal of International Business Studies 38 (6) (2007) 975-997.
[35] L. Nachum, S. Zaheer, S. Gross, “Does it matter where countries are? Proximity to knowledge, markets and resources, and MNE location choices”, Management Science 54 (7) (2008) 1252-1265.
[36] J.R. Markusen, A.J. Venables, D.E. Konan, K.H. Zhang, A unified treatment of horizontal direct investment, vertical direct investment, and the pattern of trade in goods and services, National Bureau of Economic Research, 1996.
[37] E. McCann, “Urban Policy Mobilities and Global Circuits of Knowledge: Toward a Research Agenda”, Annals of the Association of American Geographers 101 (1) (2011) 107-130.
[38] J.L. Arregle, P.W. Beamish, L. Hébert, “The Regional Dimension of MNEs' Foreign Subsidiary Localization”, Journal of International Business Studies 40 (1) (2009) 86-107.
[39] J.L. Arregle, T.L. Miller, M.A. Hitt, P.W. Beamish, “Do regions matter? An integrated institutional and semiglobalization perspective on the internationalization of MNEs”, Strategic Management Journal 34 (8) (2013) 910-934.