Locational flexibility of the manufacturing multinational enterprise: a framework and two case studies
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Abstract
flexibility of a multinational enterprise (the difficulty/ease with which it can transfer its manufacturing
activity from the initial host territory to another territory). I differentiate five factors: (1) the nature
(generic vs. specific) of the territorial resources used by the multinational’s subsidiary; (2) market
access offered by production in the host territory; (3) the durability and specificity of the assets owned
by the multinational enterprise in the host territory; (4) other barriers making exit out of the host
territory difficult (redundancy costs, interrelatedness of the subsidiary’s activity with other units of the
multinational enterprise, etc.); and (5) the availability of substitute plants by the multinational
enterprise that can take over the production of the host territory’s subsidiary. Once the framework is
presented, I use it to analyse the mobility potential of the activities of two multinational enterprises: a
Taiwanese company (Nien Hsing Textile Co.) that was assembling trousers in Nicaragua (fieldwork in
1998 and 2007) and a Japanese company (Sony) that was assembling television sets and
manufacturing cathode ray tubes in Wales (fieldwork in 2000-2001). The study shows the importance,
in the short run, of the heaviness of the capital goods used in production as factor limiting mobility. In
the long run, however, the degree of specificity (uniqueness) of the territorial resources employed by
the multinational enterprise (qualified labour, specialised suppliers, etc.) is crucial. The study shows
also the risk of the “no-upgrading trap” of inward manufacturing investment for peripheral host
territories. Indeed, multinational enterprises that realise small profit margin activities, and in which
labour costs occupy an important share in total production costs, will want to maintain their
international locational flexibility to be able to respond swiftly to changes in the configuration of
location advantages. Therefore, they will restrict their sunk investments (in fixed assets, in training, in
collaborations with local suppliers, etc.) in the host territory. This strategy counters the local
embeddedness of the subsidiary and limits its structural economic impact on the host territory.
Citacióvan Wunnik, L. Locational flexibility of the manufacturing multinational enterprise: a framework and two case studies. A: European Congress of the Regional Science Association International. "51st European Congress of the Regional Science Association International". Barcelona: 2011, p. 1-23.
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ERSA2011_paper_01787 - Lucas van Wunnik.pdf | Paper del congreso ERSA 2011 | 276,7Kb | Visualitza/Obre |