Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence

We explore the determinants of MNE subsidiaries decisions to set-up own R&D laboratories drawing on evidence from UK regions. In this context, we also test for the interaction between firm's internal and external environments. We also integrate extant IB and strategic management literatures and incorporate recent debates in New Economic Geography (NEG) in specifying the 'external environment'. We find support for the role of firm's 'productive opportunity' and predictions of the NEG on the basis of an analysis of primary data. We discuss implications for managerial practice and government regional policies.MNE subsidiaries, R&D laboratory, internal and external environment, productive opportunity

The Multinational Corporation and the Global Sourcing of Knowledge: Remodeling Absorptive Capacity

We build on extant theory of the MNC, MNC subsidiaries, absorptive capacity and Penrose's concept of 'productive opportunity' to develop a framework on the MNC and absorptive capacity (AC) that allows us to explore the role of subsidiaries in the global sourcing of knowledge. We develop and test hypotheses using primary questionnaire-collected data. Our results support the idea that subsidiaries' realized AC can be improved by the realized and potential AC of the MNC group and the subsidiary and in turn may improve the performance of the subsidiaries and the group as a whole.Multinational Corporation, absorptive capacity, subsidiaries, knowledge

Inflation Dynamics and the Cross-Sectional Distribution of Prices in the E.U. Periphery

We explore the connection between inflation and its higher-order moments for three economies in the periphery of the European Union (E.U.), Greece, Portugal and Spain. Motivated by a micro-founded model of inflation determination, along the lines of the hybrid New Keynesian Phillips curve, we examine whether and how much does the cross-sectional skewness in producer prices affect the path of inflation. We develop our analysis with the perspective of economic integration/inflation harmonization (in the E.U.) and discuss the peculiarities of these three economies. We find evidence of a strong positive relation between aggregate inflation and the distribution of relative-price changes for all three countries. A potentially important implication of our results is that, if the cross-sectional skewness of prices is directly related to aggregate inflation, not only the direction but also the magnitude of a nominal shock would influence output and inflation dynamics. Moreover, the effect of such a shock could be received asymmetrically, even when countries share a common currency.Inflation; Cross-sectional distribution of prices; Greece, Portugal, Spain; European Union; Harmonization.

Choice of Location and the Roles of Foreign Subsidiaries: Evidence from UK Regions

In this paper we investigate the location determinants of inward foreign direct investment (FDI) in the UK at a regional level. The paper focuses on a relatively under investigated field, that of the linkage between choice of regional location- within a particular host countryand subsidiary roles. The key contribution steaming from this analysis is that we provide, for the first time, detailed support of the location factors affecting distinctive types of subsidiaries. The external environment affects differently the two types of subsidiaries under investigation with agglomeration features playing the most significant role. At the same time idiosyncratic FDI factors do seem to play the most important role for both types of subsidiaries. Important policy implications are then raised, regarding the design of welltargeted FDI promoting policies aiming both at upgrading regional potential as well as specific sectors and companies.UK Regions, subsidiaries, agglomeration, location choice

The Role of Physical and Intellectual Infrastructure

Abstract In a recent global competitiveness report by the IMF, the four Nordic countries all ranked in top ten, attesting to the region’s growing attractiveness as a host location for MNCs. This paper investigates the driving forces determining foreign direct investment flows into Scandinavia. We use a panel data set covering FDI inflows to Denmark, Sweden, Norway and Finland for the period 1979-2000. Results suggest that, in addition to traditional determinants of FDI, technological advantages of the region are of particular importance for foreign investors. Thus, evidence is provided for the changing pattern of international production indicating strategic needs for MNCs to acquire assets and technology that are specific to particular locations

Complements or Substitutes? New Theoretical Considerations and Empirical Evidence on the Imports and inward FDI Relationship in Central and Eastern European Countries

This paper addresses the imperative need to understand the relationship between inward FDI and trade by developing a new conceptual approach and providing empirical evidence. We use an expanded time dataset, from 1992 to 2008 and an enriched dataset of countries, sectors and location factors. In regards to the inward FDI vs. imports relationship, results comply with our theoretical formulation and strongly indicate an overall complementarity with each other. In the case of FDI we find strong locational characteristics such as the large market size, the gradual improvement of the macro-environment and finally the quality of labour force to play a positive role

Regional Mix and the Roles of Foreign Subsidiaries: A New Conceptualization and Empirical Evidence on the UK Case

This paper develops a new conceptualization of the relationship between regional determinants and roles of foreign subsidiaries and empirically investigates this relationship in the UK at a disaggregated regional level. It focuses particularly on a relatively under- investigated field, that of the linkage between choice of regional location -within a particular host country- and subsidiary roles. The key contribution steaming from this analysis is the development of the Asset Specificity Framework (ASF) combining regional characteristics with distinctive types of subsidiaries. This framework is further examined providing detailed support for our allegations. The external environment impacts differently on subsidiary types, with agglomeration features playing the most significant role. At the same time though, idiosyncratic Foreign Direct Investment (FDI) aspects do seem to exert the most important influence for these types of subsidiaries. Interesting policy implications may then be raised regarding the design of well-targeted FDI promoting policies, aiming at upgrading regional potential on one hand and pursue the attraction of specific sectors and companies on the other

The 'core-periphery' pattern of FDI-led growth and production structure in the EU

The present study attempts to shed light on a central and under-investigated issue in the European integration debate, referring to the impact of foreign direct investment (FDI) in the growth process of EU countries and detecting the channels through which FDI can interact with host characteristics to raise income levels. Using an advanced econometric approach, i.e., the Arellano-Bond dynamic panel data estimation, it predicts a 'core-periphery' growth pattern, attributed to initial strengths and weaknesses of the regions, which, in turn, are responsible for attracting different types of foreign activity. Policy implications as to the provision of appropriate investment incentives and the development of a strong human resources base in periphery are then raised, in order for it to be able to compete internationally as a host to technology-based investments and reap the benefits associated with knowledge transfer.

The FDI and Trade relationship revisited under structural change: evidence from a sector-based analysis in Central and Eastern European countries

This study revisits the long standing argument on the Foreign Direct Investment (FDI) and Trade relationship in an effort to shed some new light on the issue as well as investors’ behavior. This is achieved within the context of structural changes as proposed by the Investment Development Path (IDP) paradigm. In addition, it does so in a sector-based framework where more accurate results may be obtained and safer implications may be outlaid. We use an expanded dataset of Central and Eastern European countries, from the early stages of transition in 1992 to 2006 covering a variety of location factors. Results pinpoint to a differential relationship between FDI and imports among the sectors, indicating a complementary one for manufacturing (secondary) and services (tertiary) and a substitution one for agriculture (primary). In the case of FDI we find strong locational characteristics such as the large market size, the gradual improvement of the macro-environment and finally the quality of labour force as centripetal forces, well documented along the structural changes framework of the IPD we employ here