The Home-Based Advantages and a Hierarchy of Location Resources: Foreign and Local Firms Dependency on Location Resources
ADVANCES IN INTERNATIONAL MANAGEMENT: DYNAMICS OF GLOBALIZATION: LOCATION-SPECIFIC ADVANTAGES OR LIABILITIES OF FOREIGNNESS, pp. 55-85, C.G. Asmussen, T. Devinney, T. Pedersen and L. Tihanyi, eds., Emerald Publications, 2011
38 Pages Posted: 12 Oct 2011
Date Written: October 12, 2011
I seek to explain cases whereby locationally advantageous countries do not give rise to internationally competitive national firms, as theory suggests. Rather, foreign firms enjoy equal access to the country resources and build strong competitive position based on them. I suggest that location resources vary in terms of the extent to which foreign firms experience liabilities in accessing them, and in the ability of MNE internal networks to provide substitute for them. I introduce a hierarchy of location resources along these two dimensions and suggest that the position of resources in the hierarchy determines variations between foreign and national firms in terms of their ability to access location resources. When critical advantages are based on location resources that are high on the hierarchy, that is, are exclusive to national firms, the latter are likely to take the lead in an industry, establishing strong competitive position based on these superior resources. In contrast, when critical advantages are based on location resources which foreign firms can access on similar terms to those of national firms, or else can rely on the MNE network for their provision, the leading firms in an industry are likely to originate in multiple countries and no apparent home country effect will be observed. I outline the implications of the findings for MNE location strategies and for policy makers.
Keywords: multinational enterprises (MNEs), location resources and firms resources, nationality advantage, home country, insurance, London, Global cities
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