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Location and survival of MNEs' subsidiaries: Agglomeration and heterogeneity of firms

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  • Sergio Mariotti
  • Rocco Mosconi
  • Lucia Piscitello

Abstract

Research summary Our study provides a quasi–replication of Shaver and Flyer (2000), which was among the first studies that challenged the positive role of agglomeration in determining companies' location choice and performances, thus changing the way management scholars view companies' attitude towards agglomeration forces. We employ the same research design, specification and tests, and a different population, to discuss the generalizability of the original study. Building on the framework of Shaver and Flyer (2000), our findings offer intriguing new empirical evidence highlighting the importance of the differential between entering foreign firms and host country firms as a crucial condition in understanding agglomeration forces and adverse selection mechanisms. Managerial summary Our exercise confirms that agglomeration forces act differently on stronger versus weaker multinational enterprises (MNEs). However, we find that stronger MNEs tend to avoid location in highly specialized areas when they are afraid of knowledge leakages towards host country–based rivals that have enough absorptive capacity to benefit and improve their competitive advantages. Managerial implications are quite relevant. Indeed, when MNEs avoid co–location in highly specialized areas, they also limit their own access to local knowledge and other agglomeration economies, such as supply networks and qualified workforce. Thus, MNEs managers need to design and implement devices that, on the one hand prevent local leakages of their knowledge and, on the other, do not hinder their access to local unique knowledge and resources.

Suggested Citation

  • Sergio Mariotti & Rocco Mosconi & Lucia Piscitello, 2019. "Location and survival of MNEs' subsidiaries: Agglomeration and heterogeneity of firms," Strategic Management Journal, Wiley Blackwell, vol. 40(13), pages 2242-2270, December.
  • Handle: RePEc:bla:stratm:v:40:y:2019:i:13:p:2242-2270
    DOI: 10.1002/smj.3081
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    Cited by:

    1. Danchi Tan & Weichieh Su & Joseph T. Mahoney & Yasemin Kor, 2020. "A review of research on the growth of multinational enterprises: A Penrosean lens," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 498-537, June.
    2. Yijia Song & Ruichen Deng & Ruoxi Liu & Qian Peng, 2020. "Effects of Special Economic Zones on FDI in Emerging Economies: Does Institutional Quality Matter?," Sustainability, MDPI, vol. 12(20), pages 1-21, October.
    3. Siddharth Sharma & Wilbur Chung, 2022. "Demand agglomeration economies, neighbor heterogeneity, and firm survival: The effect of HHGregg's bankruptcy," Strategic Management Journal, Wiley Blackwell, vol. 43(2), pages 370-401, February.
    4. Hao-Chen Huang & Hsin-Yin Chang & Ting-Hsiu Liao, 2023. "Analyzing the Impact of the Labor Market on Company Location Selection Using Spatial Econometric Models," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-9.
    5. Irina G. Vladimirova & Natalia Yu. Konina & Viktor S. Efremov, 2020. "Transnationalization of multinational corporations: Peculiarities and trends," Upravlenets, Ural State University of Economics, vol. 11(4), pages 70-81, September.
    6. Su, Taoyong & Yu, Yuzhu & Chen, Yongheng & Hou, Wanrong, 2023. "On or off: The triggering effect of underperformance duration on cooperative innovation," Technovation, Elsevier, vol. 126(C).
    7. Prithwiraj (Raj) Choudhury & Tarun Khanna & Victoria Sevcenko, 2023. "Firm-Induced Migration Paths and Strategic Human-Capital Outcomes," Management Science, INFORMS, vol. 69(1), pages 419-445, January.
    8. Paul Caussat, 2021. "Competitive Advantages in a Hostile, Regulated Environment: Four Multinational Banks in India," Management International Review, Springer, vol. 61(6), pages 831-879, December.

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