Location of Repository

New insights on the role of location advantages in international innovation

By Rajneesh Narula and Grazia D. Santangelo


This paper takes a closer look at the role of location advantages in the spatial distribution of MNE R&D activity. In doing so, we have returned to first principles by revisiting our understanding of L and O advantages and their interaction. We revisit the meaning of L advantages, and offer a succinct differentiation of L advantages. We emphasise the importance of institutions, and flesh out the concept of collocation L advantages, which play an important role at the industry and firm levels of analysis. Just because a country possesses certain L advantages when viewed at a macro-level, does not imply that these are available to all industries or all firms in that location without differential cost. When these are linked to the distinction between location-bound and non location-bound O advantages, and we distinguish between MNEs and subsidiaries it allows for a clearer understanding of the MNE's spatially distributed activities. These are discussed here in the context of R&D, which - in addition to the usual uncertainties faced by firms - must deal with the uncertainties associated with innovation. Although prior literature has sometimes framed the centralisation/decentralisation, spatial separation/collocation debates as a paradox facing firms, when viewed within the context of the cognitive limits to resources, the complexities of institutions, and the slow pace of the evolving specialisation of locations, these are in actuality trade-offs firms must make.FDI, foreign investment, direct investment, multinationals, transnational corporations, MNEs, eclectic paradigm, collocation, locational advantage, country specific advantages

OAI identifier:

Suggested articles



  1. (2000). Capitalism, profits and innovation in the new technoeconomic paradigm'.
  2. (2008). Does it matter where patent citations come from? Inventor versus examiner citations in European patents'.
  3. (2003). Iammarino
  4. (2010). Introduction: Place, space and organization, economic geography and the multinational enterprise'.
  5. Kosmopoulou (2002) 'What Determines the Internationalization of Corporate Technology?'.
  6. (2008). Location and the Multinational Enterprise: A Neglected Factor? '.
  7. (2006). Location choices across the value chain: How activity and capability influence collocation'.
  8. (2007). Location strategies and knowledge spillovers'.
  9. (2005). MNE competence-creating subsidiary mandates'.
  10. (2004). Multinational and Industrial Competitiveness: A New Agenda. Edward Elgar,
  11. (1993). Multinational Enterprises and the Global Economy.
  12. (2011). Physical attraction and the geography of knowledge sourcing in multinational enterprises'.
  13. (1999). The frontier of international technology networks: sourcing abroad the most highly tacit capabilities'.
  14. (2006). The Geography of Innovation'.
  15. (1995). The globalisation of technology: What remains of the product cycle model?'.
  16. (1999). The internationalisation of R&D by multinationals: A trade-off between external and internal proximity'.
  17. (2002). The new geography of corporate research in information and communications technology (ICT)'.
  18. (1980). Toward an eclectic theory of international production: Some empirical tests'.
  19. (1977). Trade, Location of Economic Activity and the MNE: A Search for an Eclectic Approach'.

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.