The Location Behavior of the Multinational Enterprise : Some Analytical Issues

In the international business literature location behavior has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the nature, role and behavior of multinational enterprise. In this paper we argue that this approach is now no longer appropriate for discussing the spatial behavior of MNEs, because of the fundamental changes which have taken place either in MNE organization or in the global and institutional environment for foreign direct investment (FDI). At the same time, we argue that current location theory from regional economics and economic geography is also largely unsuitable for discussing these issues, such that the spatial behavior of the MNE provides a set of difficult challenges to location analysts. There appears to have been some response to these issues from the international business and management literature, most notably the Porter literature on clusters. However, we will also argue here that this literature provides few, if any real answers to the problems set by the geographical behavior of the MNE. We conclude that a fusion of traditional economic geography approaches with a focus on the information and organizational aspects of the firm and the region under consideration may be a way forward for both theory and empirical analysis