Does it Matter Where Countries Are? Proximity to Knowledge, Markets and Resources and MNE Location Choices

31 Pages Posted: 24 May 2008

See all articles by Lilac Nachum

Lilac Nachum

City University of New York - Allen G. Aaronson Department of Marketing & International Business

Srilata Zaheer

University of Minnesota - Twin Cities - Carlson School of Management

Shulamith Gross

Baruch College of the City University of New York- Zicklin School of Business

Date Written: 2008

Abstract

We suggest that the proximity of a country to other countries is a factor that affects its choice as an 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 dataset comprising 138,050 investments undertaken by US 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 are smaller firms.

Keywords: MNE location choice, countries proximity to the world, distance, proximity to knowledge, markets and resources, sandwich estimators

JEL Classification: F23, C23, C25

Suggested Citation

Nachum, Lilac and Zaheer, Srilata and Gross, Shulamith, Does it Matter Where Countries Are? Proximity to Knowledge, Markets and Resources and MNE Location Choices (2008). Available at SSRN: https://ssrn.com/abstract=1134422 or http://dx.doi.org/10.2139/ssrn.1134422

Lilac Nachum (Contact Author)

City University of New York - Allen G. Aaronson Department of Marketing & International Business ( email )

One Bernard Baruch Way, B12-240
New York, NY 10010-5585
United States

Srilata Zaheer

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
+1 612 6245590 (Phone)
+1 612 6261316 (Fax)

Shulamith Gross

Baruch College of the City University of New York- Zicklin School of Business ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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