The evolution of knowledge transfer and the location of a multinational corporation: Theory and mathematical model

Purpose – The purpose of this paper is to draw attention to the link between knowledge transfer flow and the location of a multinational corporation (MNC). Design/methodology/approach – The authors put forward a conceptual approach to formulate the mathematical modelling of a firm's performance following the decision to join a regional cluster. This model builds on a recent stream of theoretical literature which has investigated the relationship between networks and the creation and diffusion of knowledge. The purpose of this model is to propose a mathematical tool to determine the long-term financial results induced by knowledge transfer from an MNC's acquired subsidiary located in a cluster to another part of the MNC. Findings – This study has several important research implications. First, it is a useful step towards a better understanding of how knowledge transfer effects may interact with cluster effects, while explaining subsidiary location performance. Second, it focuses on the most valuable, often highly tacit knowledge competencies. Research limitations/implications – Other investigations would certainly be welcome to improve the links between the proposed mathematical model and the efficiency of the location of an MNC in a cluster through a quantitative study. Practical implications – The authors constructed this study with the aim of developing a model that would give us a better understanding of the impact of embedded knowledge on the efficiency of a localization choice made by an MNC. Originality/value – To date, there has been little in the literature on the profit arising from a multinational firm's choice of location.