The role of geographical and temporary proximity in MNEs’ location and intra-firm co-location choices

Abstract

This paper investigates the role of geographical and temporary proximity in the location and co-location decisions of new manufacturing activities by foreign multinational enterprises (MNEs). Empirical analysis confirms that foreign MNEs co-locate their new manufacturing plants with their plants already operating in the same activity, while geographical proximity exerts a much weaker role when the latter operate in other manufacturing and services activities. This is especially true in the case of knowledge intensive business services, where temporary proximity is more easily obtainable through the travelling and meeting of professionals. Moreover, a spatial econometric extension of our analysis confirms a geographical decay effect for intra-firm co-location with activities located in contiguous provinces.

International connectivity and the location of multinational enterprises' knowledge‐intensive activities: Evidence from US metropolitan areas

“…We also find that the share of international passengers at airports, which is our measure of infrastructural connectivity for the mobility of people, is positively associated with the location of operations activities. This may be consistent with the idea that operations are now part of a complex manufacturing integration system that also requires frequent interactions of several people involved in different stages of the value chain and in different locations, especially when knowledge-intensive and more mobile activities are involved (Berry, 2014;Lavoratori et al, 2020). Instead, sales and marketing as downstream activities in the firm's value chain are attracted by MSAs with a higher degree of producer services connectivity, which are typically more highly-connected global cities characterized by a diverse and cosmopolitan environment (Asmussen et al, 2019;Belderbos et al, 2020).…”

“…The literature has widely analyzed the importance of connectivity for the location decisions of manufacturing, logistics and retail firms (Asmussen et al, 2019;Basile, Benfratello, & Castellani, 2013;Lavoratori, Mariotti, & Piscitello, 2020;Love & Roper, 2001), often emphasizing the key role played by infrastructural connections in the "physical goods value chain" of MNEs (Asmussen et al, 2019, p. 356). However, this stream of studies has devoted less attention to the role of connectivity in the location of knowledge-intensive activities, such as those that are conducted in MNEs' Research and Development (R&D) laboratories and Headquarter (HQs) units.…”

In the Eye of the Storm: Entrepreneurs and Well-Being During the COVID-19 Crisis

“…Our study is also related to economic geography, in which the role of physical proximity and geographical distance between economic actors and to different resources and inputs has been extensively studied ( Tobler, 1970 ; Lavoratori et al, 2020 ). We add to this literature by scrutinizing how entrepreneurs who are geographically distant from the epicenter of a crisis detach themselves from the crisis.…”

Globalisation, Logistics and Food Supply: Evidence from Vietnam

“…helping maintain global food supplies (Elleby et al, 2020;MacDonald et al, 2015; Globalisation, Logistics and Food Supply: Evidence from Vietnam operational activities of multinationals have been expanding in many regions of the world (Hill & Hult, 2019, p. 8;UNCTAD, 2020). Intra-firm trade activities have made up a large proportion of the global trade value (Huang et al, 2020;Lavoratori et al, 2020;Morikawa, 2019;Vinod & Rao, 2019). Intra-firm exports arguably contributed approximately one-third of the world exports (UNCTAD, 2016).…”