The Home-Based Advantages and a Hierarchy of Location Resources: Foreign and Local Firms Dependency on Location Resources

This chapter seeks to explain cases whereby locationally advantageous countries do not give rise to internationally competitive national firms, as theory suggests. Rather, foreign firms enjoy equal access to the country resources and build strong competitive position based on them. It suggests that location resources vary in terms of the extent to which foreign firms experience liabilities in accessing them, and in the ability of MNE internal networks to provide substitute for them. It introduces a hierarchy of location resources along these two dimensions and suggests that the position of resources in the hierarchy determines variations between foreign and national firms in terms of their ability to access location resources. When critical advantages are based on location resources that are high on the hierarchy, that is, are exclusive to national firms, the latter are likely to take the lead in an industry, establishing strong competitive position based on these superior resources. In contrast, when critical advantages are based on location resources which foreign firms can access on similar terms to those of national firms, or else can rely on the MNE network for their provision, the leading firms in an industry are likely to originate in multiple countries and no apparent home country effect will be observed. This chapter outlines the implications of the findings for MNE location strategies and for policy makers.