Does it matter where countries are? Proximity to knowledge, markets and resources, and MNE location choices

Lilach Nachum, Srilata Zaheer, Shulamith Gross

Research output: Contribution to journalArticle

75 Scopus citations

Abstract

We suggest that the proximity of a country to other countries is a factor that affects its choice as a multinational enterprise (MNE) location. We introduce the concept of a country's proximity to the global distribution of knowledge, markets, and resources, and frame this concept as a function of both geographic distance and the worldwide spatial distribution of these factors. We test our location model on a data set comprising 138,050 investments undertaken by U.S. MNEs worldwide. Our findings show that the proximity of a country to the rest of the world has a positive impact on MNEs choosing that country as a location. Proximity to the world's knowledge and markets are stronger drivers of location choice than is proximity to the world's resources, after accounting for the country's own endowments. Larger firms are able to benefit more from remote locations than smaller firms are.

Original languageEnglish (US)
Pages (from-to)1252-1265
Number of pages14
JournalManagement Science
Volume54
Issue number7
DOIs
StatePublished - Jul 1 2008

Keywords

  • Countries' proximity to the world
  • Distance
  • Markets and resources
  • Multinational enterprise location choice
  • Proximity to knowledge
  • Sandwich estimators

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