MNE Location Strategy and Global Cities: Exploring the Role of Liability of Foreignness on BRIC MNEs Location Strategy in Global Cities

Nargis Amini & Christina Myhre Lystad

Student thesis: Master thesis

Abstract

Location is described as one of the central questions that define international business research. Yet, the notion of global cities and their leading role in the geographic space has received scarce attention. Embedded in the existing literature on global cities, we argue that global cities possess distinct characteristics, namely a cosmopolitan environment, advanced producer services and interconnectedness to local and global markets. These attributes are believed to reduce the institutional distance components giving rise to the liability of foreignness (LOF), and as such, influence the location strategy of MNEs. Our study provides an empirical examination of the location strategy of MNEs from the BRIC countries, and investigates how the location decisions of these firms are influenced by LOF. By using multinomial logistic models, we illustrate that global cities play an important role when institutional distance is large. We also suggest that viewing the location behaviour of MNEs from different countries as homogeneous might be a misconception. Additionally, we look at the role of subsidiary industry, and propose that high intensity of integration and responsiveness pressures (IR) affects the location choice of MNEs. Conclusively, our study provides important insights for scholars and policymakers concerning the factors that propel MNE activity towards or away from global cities. We also address the importance of future research to improve our understanding of the MNE within geographic space.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages135
SupervisorsBersant Hobdari