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Locational flexibility of the manufacturing multinational enterprise: a framework and two case studies
Van Wunnik, Lucas Philippe
Universitat Politècnica de Catalunya. Departament d'Organització d'Empreses
flexibility of a multinational enterprise (the difficulty/ease with which it can transfer its manufacturingactivity 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) marketaccess offered by production in the host territory; (3) the durability and specificity of the assets ownedby the multinational enterprise in the host territory; (4) other barriers making exit out of the hostterritory difficult (redundancy costs, interrelatedness of the subsidiary’s activity with other units of themultinational enterprise, etc.); and (5) the availability of substitute plants by the multinationalenterprise that can take over the production of the host territory’s subsidiary. Once the framework ispresented, I use it to analyse the mobility potential of the activities of two multinational enterprises: aTaiwanese company (Nien Hsing Textile Co.) that was assembling trousers in Nicaragua (fieldwork in1998 and 2007) and a Japanese company (Sony) that was assembling television sets andmanufacturing 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. Inthe long run, however, the degree of specificity (uniqueness) of the territorial resources employed bythe multinational enterprise (qualified labour, specialised suppliers, etc.) is crucial. The study showsalso the risk of the “no-upgrading trap” of inward manufacturing investment for peripheral hostterritories. Indeed, multinational enterprises that realise small profit margin activities, and in whichlabour costs occupy an important share in total production costs, will want to maintain theirinternational locational flexibility to be able to respond swiftly to changes in the configuration oflocation advantages. Therefore, they will restrict their sunk investments (in fixed assets, in training, incollaborations with local suppliers, etc.) in the host territory. This strategy counters the localembeddedness of the subsidiary and limits its structural economic impact on the host territory.
2012-05-11
Àrees temàtiques de la UPC::Economia i organització d'empreses
International business enterprises
Empreses -- Direcció i administració
Empreses multinacionals -- Administració -- Casos, Estudi de
Open Access
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