SAM ADVANCED MANAGEMENT JOURNAL

International Spatial Distribution Of Multinational Corporations

Hao Tan, Mike W. Peng, and Craig D. Macaulay

Citation: Tan, H., Peng, M.W., & Macaulay, C.D. (2022). International spacial distribution of multinational corporations. SAM Advanced Management Journal, 87(1),27-44. https://doi.org/10.52770/RIOA7761

Abstract

This article introduces a new concept of international spatial distribution to study the international diversification behaviors of multinational corporations (MNCs). Drawing upon spatial research, this new approach measures and analyzes the geographic diversification patterns of MNCs based on two important spatial dimensions: distance and concentration. By leveraging a sample of the largest U.S. MNCs, we propose a new typology of MNCs based on their international spatial distribution. As a complement of existing approaches to the research on international diversification strategies, we suggest that our concept sheds new light on the location behaviors of MNCs..

References

Alessandri, T. M., Cerrato, D., & Eddleston, K. A. (2018). The mixed gamble of internationalization in family and nonfamily firms: The moderating role of organizational slack. Global Strategy Journal, 8(1), 46–72. https://doi.org/10.1002/gsj.1201

Alfoldi, E. A., Clegg, L. J., & McGaughey, S. L. (2012). Coordination at the edge of the empire: The delegation of headquarters functions through regional management mandates. Journal of International Management, 18(3), 276–292. https://doi.org/10.1016/j.intman.2012.06.003

Ambos, B., & Håkanson, L. (2014). The concept of distance in international management research. Journal of International Management, 20(1), 1–7. https://doi.org/10.1016/j.intman.2013.10.003

Amit, R., & Livnat, J. (1988). Diversification strategies, business cycles and economic performance. Strategic Management Journal, 9(2), 99–110. https://doi.org/10.1002/smj.4250090202

Ang, S. H., Benischke, M. H., & Hooi, A. W.-L. (2018). Frequency of international expansion through high control market expansion modes and interlocked directorships. Journal of World Business, 53(4), 493–503. https://doi.org/10.1016/j.jwb.2018.02.003

Arregle, J. L., Duran, P., Hitt, M. A., & van Essen, M. (2016). Why is family firms’ internationalization unique? A meta-analysis. Entrepreneurship Theory and Practice, 41(5), 801–831. https://doi.org/10.1111/etap.12246

Asmussen, C. G., Pedersen, T., & Petersen, B. (2007). How do we capture “global specialization” when measuring firms’ degree of globalization?. Management International Review, 47(6), 791–813. https://doi.org/10.1007/s11575-007-0053-x

Ayal, I., & Zif, J. (1979). Market expansion strategies in multinational marketing. Journal of Marketing, 43(2), 84–94. https://doi.org/10.1177/002224297904300209

Bartlett, C. A., & Beamish, P. W. (2018). Transnational management: Text and cases in cross-border management (8th ed.). Cambridge: Cambridge University Press.

Bathelt, H. (2006). Geographies of production: Growth regimes in spatial perspective. Progress in Human Geography, 30(2), 223–236. https://doi.org/10.1191/0309132506ph603pr

Batsakis, G., & Mohr, A. T. (2017). Revisiting the relationship between product diversification and internationalization process in the context of emerging market MNEs. Journal of World Business, 52(4), 564–577. https://doi.org/10.1016/j.jwb.2016.11.005

Benito, G. R. G., Lunnan, R., & Tomassen, S. (2011). Distant encounters of the third kind: Multinational companies locating divisional headquarters abroad. Journal of Management Studies, 48(2), 373–394. https://doi.org/10.1111/j.1467-6486.2010.00962.x

Beugelsdijk, S., Ambos, B., & Nell, P. C. (2018). Conceptualizing and measuring distance in international business research: Recurring questions and best practice guidelines. Journal of International Business Studies, 49(9), 1113–1137. https://doi.org/10.1057/s41267-018-0182-4

Beugelsdijk, S., McCann, P., & Mudambi, R. (2010). Place, space and organization: Economic geography and the multinational enterprise. Journal of Economic Geography, 10(4), 485–493. https://doi.org/10.1093/jeg/lbq018

Beugelsdijk, S., & Mudambi, R. (2013). MNEs as border-crossing multi-location enterprises: The role of discontinuities in geographic space. Journal of International Business Studies, 44(5), 413–426. https://doi.org/10.1057/jibs.2013.23

Bicksler, J. L. (1984). International corporate diversification, market valuation, and size-adjusted evidence: Discussion. The Journal of Finance, 39(3), 743. https://doi.org/10.2307/2327934

Blanc-Brude, F., Cookson, G., Piesse, J., & Strange, R. (2014). The FDI location decision: Distance and the effects of spatial dependence. International Business Review, 23(4), 797–810. https://doi.org/10.1016/j.ibusrev.2013.12.002

Brock, D. M., & Yaffe, T. (2008). International diversification and performance: The mediating role of implementation. International Business Review, 17(5), 600–615. https://doi.org/10.1016/j.ibusrev.2008.07.003

Cantwell, J. (2009). Location and the multinational enterprise. Journal of International Business Studies, 40(1), 35–41. https://doi.org/10.1057/jibs.2008.82

Chakrabarti, A., Vidal, E., & Mitchell, W. (2011). Business transformation in heterogeneous environments: The impact of market development and firm strength on retrenchment and growth reconfiguration. Global Strategy Journal, 1(1-2), 6–26. https://doi.org/10.1002/gsj.3

Chan, C. M., Makino, S., & Isobe, T. (2010). Does subnational region matter? Foreign affiliate performance in the United States and China. Strategic Management Journal, 31(11), 1226–1243. https://doi.org/10.1002/smj.854

Chatterjee, S., & Blocher, J. D. (1992). Measurement of firm diversification: Is it robust? Academy of Management Journal, 35(4), 874–888. https://doi.org/10.5465/256320

Chen, C. J. P., Cheng, C. S. A., He, J., & Kim, J. (1997). An investigation of the relationship between international activities and capital structure. Journal of International Business Studies, 28(3), 563–577. https://doi.org/10.1057/palgrave.jibs.8490111

Chen, S., & Tan, H. (2012). Region effects in the internationalization–performance relationship in Chinese firms. Journal of World Business, 47(1), 73–80. https://doi.org/10.1016/j.jwb.2010.10.022

Coe, N. M., Kelly, P. F., & Yeung, H. W. (2013). Economic geography : a contemporary introduction (2nd ed.). Hoboken: Wiley-Blackwell.

Cuervo-Cazurra, A. (2012). Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate. Global Strategy Journal, 2(3), 153–167. https://doi.org/10.1111/j.2042-5805.2012.01039.x

Cui, L., & He, X. (2017). Expanding near the home base or venture far? The influence of home country state on the economic distance of foreign direct investments. Journal of Business Research, 75, 95–107. https://doi.org/10.1016/j.jbusres.2017.02.011

Dai, L., Eden, L., & Beamish, P. W. (2013). Place, space, and geographical exposure: Foreign subsidiary survival in conflict zones. Journal of International Business Studies, 44(6), 554–578. https://doi.org/10.1057/jibs.2013.12

Daniels, J. D., & Bracker, J. (1989). Profit performance: Do foreign operations make a difference? Management International Review, 29(1), 46–56.

Dellestrand, H., & Kappen, P. (2012). The effects of spatial and contextual factors on headquarters resource allocation to MNE subsidiaries. Journal of International Business Studies, 43(3), 219–243. https://doi.org/10.1057/jibs.2011.57

Deng, P., Delios, A., & Peng, M. W. (2019). A geographic relational perspective on the internationalization of emerging market firms. Journal of International Business Studies, 51(1), 50–71. https://doi.org/10.1057/s41267-019-00276-y

Deng, S. E., & Elyasiani, E. (2008). Geographic diversification, bank holding company value, and risk. Journal of Money, Credit and Banking, 40(6), 1217–1238. https://doi.org/10.1111/j.1538-4616.2008.00154.x

Doh, J. P., & Hahn, E. D. (2008). Using spatial methods in strategy research. Organizational Research Methods, 11(4), 659–681. https://doi.org/10.1177/1094428107300340

Dunning, J. H. (1998). Location and the multinational enterprise: A neglected factor? Journal of International Business Studies, 29(1), 45–66. https://doi.org/10.1057/palgrave.jibs.8490024

Dunning, J. H., & Lundan, S. M. (2008). Multinational enterprises and the global economy (2nd ed.). Cheltenham: Edward Elgar.

Edgington, D. W., & Hayter, R. (2013). “Glocalization” and Regional Headquarters: Japanese Electronics Firms in the ASEAN Region. Annals of the Association of American Geographers, 103(3), 647–668. https://doi.org/10.1080/00045608.2011.653731

Enright, M. J. (2005). The roles of regional management centers. MIR: Management International Review, 45(1), 83–102.

Fatemi, A. M. (1988). The effect of international diversification on corporate financing policy. Journal of Business Research, 16(1), 17–30. https://doi.org/10.1016/0148-2963(88)90078-1

Flores, R. G., & Aguilera, R. V. (2007). Globalization and location choice: An analysis of US multinational firms in 1980 and 2000. Journal of International Business Studies, 38(7), 1187–1210. https://doi.org/10.1057/palgrave.jibs.8400307

Flores, R., Aguilera, R. V., Mahdian, A., & Vaaler, P. M. (2013). How well do supranational regional grouping schemes fit international business research models? Journal of International Business Studies, 44(5), 451–474. https://doi.org/10.1057/jibs.2013.16

García-García, R., García-Canal, E., & Guillén, M. F. (2019). International dispersion and profitability: An institution-based approach. Management International Review, 59(6), 855–888. https://doi.org/10.1007/s11575-019-00402-w

Geringer, J. M., Beamish, P. W., & Dacosta, R. C. (1989). Diversification strategy and internationalization: Implications for mne performance. Strategic Management Journal, 10(2), 109–119. https://doi.org/10.1002/smj.4250100202

Ghemawat, P. (2001). Distance still matters. The hard reality of global expansion. Harvard Business Review, 79(8), 137–147.

Ghoshal, S., & Bartlett, C. A. (1990). The multinational corporation as an inter-organizational network. Academy of Management Review, 15(4), 603–625.

Goerzen, A., & Beamish, P. W. (2003). Geographic scope and multinational enterprise performance. Strategic Management Journal, 24(13), 1289–1306. https://doi.org/10.1002/smj.357

Gómez-mejia, L. R., & Palich, L. E. (1997). Cultural diversity and the performance of multinational firms. Journal of International Business Studies, 28(2), 309–335. https://doi.org/10.1057/palgrave.jibs.8490103

Grant, R. M., Jammine, A. P., & Thomas, H. (1988). Diversity, diversification, and profitability among british manufacturing companies, 1972–1984. Academy of Management Journal, 31(4), 771–801. https://doi.org/10.5465/256338

Hassel, A., Höpner, M., Kurdelbusch, A., Rehder, B., & Zugehör, R. (2003). Two dimensions of the internationalization of firms. Journal of Management Studies, 40(3), 705–723. https://doi.org/10.1111/1467-6486.00357

Heenan, D. A., & Perlmutter, H. V. (1979). Multinational organization development. Reading: Addison-Wesley.

Hennart, J. F. (2009). Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432–1454. https://doi.org/10.1057/jibs.2009.42

Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997). International diversification: Effects on innovation and firm performance in product-diversified firms. Academy of Management Journal, 40(4), 767–798. https://doi.org/10.5465/256948

Hitt, M. A., Tihanyi, L., Miller, T., & Connelly, B. (2006). International diversification: Antecedents, outcomes, and moderators. Journal of Management, 32(6), 831–867. https://doi.org/10.1177/0149206306293575

Hoskisson, R. E., Hitt, M. A., Johnson, R. A., & Moesel, D. D. (1993). Construct validity of an objective (entropy) categorical measure of diversification strategy. Strategic Management Journal, 14(3), 215–235. https://doi.org/10.1002/smj.4250140305

Hughes, J. S., Logue, D. E., & Sweeney, R. J. (1975). Corporate international diversification and market assigned measures of risk and diversification. The Journal of Financial and Quantitative Analysis, 10(4), 627–637. https://doi.org/10.2307/2330611

Jain, N. K., Pangarkar, N., Yuan, L., & Kumar, V. (2019). Rapid internationalization of emerging market firms—The role of geographic diversity and added cultural distance. International Business Review, 28(6), 101590. https://doi.org/10.1016/j.ibusrev.2019.101590

Jiang, G. F., Holburn, G. L. F., & Beamish, P. W. (2016). The spatial structure of foreign subsidiaries and MNE expansion strategy. Journal of World Business, 51(3), 438–450. https://doi.org/10.1016/j.jwb.2015.12.001

Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 23–32. https://doi.org/10.1057/palgrave.jibs.8490676

Kim, H., Hoskisson, R. E., & Wan, W. P. (2004). Power dependence, diversification strategy, and performance in keiretsu member firms. Strategic Management Journal, 25(7), 613–636. https://doi.org/10.1002/smj.395

Kim, W. C., Hwang, P., & Burgers, W. P. (1989). Global diversification strategy and corporate profit performance. Strategic Management Journal, 10(1), 45–57. https://doi.org/10.1002/smj.4250100105

Kirca, A. H., Fernandez, W. D., & Kundu, S. K. (2016). An empirical analysis and extension of internalization theory in emerging markets: The role of firm-specific assets and asset dispersion in the multinationality-performance relationship. Journal of World Business, 51(4), 628–640. https://doi.org/10.1016/j.jwb.2016.03.003

König, A., Fehn, A., Puck, J., & Graf-Vlachy, L. (2017). Primary or complex? Towards a theory of metaphorical strategy communication in MNCs. Journal of World Business, 52(2), 270–285. https://doi.org/10.1016/j.jwb.2016.12.008

Lawler, J. J., Chen, S., Wu, P.-C., Bae, J., & Bai, B. (2011). High-performance work systems in foreign subsidiaries of American multinationals: An institutional model. Journal of International Business Studies, 42(2), 202–220. https://doi.org/10.1057/jibs.2010.42

Lee, K. C., & Kwok, C. C. Y. (1988). Multinational corporations vs. domestic corporations: International environmental factors and determinants of capital structure. Journal of International Business Studies, 19(2), 195–217. https://doi.org/10.1057/palgrave.jibs.8490381

Li, L. (2007). Multinationality and performance: A synthetic review and research agenda. International Journal of Management Reviews, 9(2), 117–139. https://doi.org/10.1111/j.1468-2370.2007.00205.x

Li, X., Quan, R., Stoian, M. C., & Azar, G. (2018). Do MNEs from developed and emerging economies differ in their location choice of FDI? A 36-year review. International Business Review, 27(5), 1089–1103. https://doi.org/10.1016/j.ibusrev.2018.03.012

Lim, L. K. S., Acito, F., & Rusetski, A. (2006). Development of archetypes of international marketing strategy. Journal of International Business Studies, 37(4), 499–524. https://doi.org/10.1057/palgrave.jibs.8400206

Lu, J. W., & Beamish, P. W. (2001). The internationalization and performance of SMEs. Strategic Management Journal, 22(67), 565–586. https://doi.org/10.1002/smj.184.abs

Lu, J. W., & Beamish, P. W. (2004). International diversification and firm performance: The S-Curve hypothesis. Academy of Management Journal, 47(4), 598–609. https://doi.org/10.5465/20159604

Ma, X., Tong, T. W., & Fitza, M. (2012). How much does subnational region matter to foreign subsidiary performance? Evidence from Fortune Global 500 Corporations’ investment in China. Journal of International Business Studies, 44(1), 66–87. https://doi.org/10.1057/jibs.2012.32

Mahnke, V., Ambos, B., Nell, P. C., & Hobdari, B. (2012). How do regional headquarters influence corporate decisions in networked MNCs? Journal of International Management, 18(3), 293–301. https://doi.org/10.1016/j.intman.2012.04.001

Makino, S., & Tsang, E. W. K. (2011). Historical ties and foreign direct investment: An exploratory study. Journal of International Business Studies, 42(4), 545–557. https://doi.org/10.1057/jibs.2010.53

Marano, V., Arregle, J. L., Hitt, M. A., Spadafora, E., & van Essen, M. (2016). Home country institutions and the internationalization-performance relationship. Journal of Management, 42(5), 1075–1110. https://doi.org/10.1177/0149206315624963

Mas, F. J., Nicolau, J. L., & Ruiz, F. (2006). Foreign diversification vs concentration strategies and firm performance. International Marketing Review, 23(1), 54–82. https://doi.org/10.1108/02651330610646296

Monaghan, S., & Tippmann, E. (2018). Becoming a multinational enterprise: Using industry recipes to achieve rapid multinationalization. Journal of International Business Studies, 49(4), 473–495. https://doi.org/10.1057/s41267-017-0137-1

Nielsen, B. B., Asmussen, C. G., & Weatherall, C. D. (2017). The location choice of foreign direct investments: Empirical evidence and methodological challenges. Journal of World Business, 52(1), 62–82. https://doi.org/10.1016/j.jwb.2016.10.006

Ohmae, K. (1985). Triad power: The coming shape of global competition. New York: The Free Press.

Olusoga, S. A. (1993). Market concentration versus market diversification and internationalization: Implications for MNE performance. International Marketing Review, 10(2), 40–59. https://doi.org/10.1108/02651339310032543

Pandit, N. R., Cook, G. A. S., Wan, F., Beaverstock, J. V., & Ghauri, P. N. (2018). The economies and diseconomies of industrial clustering: Multinational enterprises versus uninational enterprises. Management International Review, 58(6), 935–967. https://doi.org/10.1007/s11575-018-0363-1

Pangarkar, N. (2008). Internationalization and performance of small and medium-sized enterprises. Journal of World Business, 43(4), 475–485. https://doi.org/10.1016/j.jwb.2007.11.009

Peng, M. W. (2012). The global strategy of emerging multinationals from China. Global Strategy Journal, 2(2), 97–107. https://doi.org/10.1002/gsj.1030

Perlmutter, H. V. (2017). The tortuous evolution of the multinational corporation. In International Business. London: Routledge.

Pinho, J. C. (2007). The impact of ownership: Location-specific advantages and managerial characteristics. International Marketing Review, 24(6), 715–734. https://doi.org/10.1108/02651330710832676

Plummer, L. A. (2010). Spatial dependence in entrepreneurship research. Organizational Research Methods, 13(1), 146–175. https://doi.org/10.1177/1094428109334199

Qian, G., Khoury, T. A., Peng, M. W., & Qian, Z. (2010). The performance implications of intra- and inter-regional geographic diversification. Strategic Management Journal, 31(9), 1018–1030. https://doi.org/10.1002/smj.855

Ripley, B. D. (1981). Spatial statistics. New York: Wiley.

Ronen, S., & Shenkar, O. (1985). Clustering countries on attitudinal dimensions: A review and synthesis. Academy of Management Review, 10(3), 435–454. https://doi.org/10.5465/amr.1985.4278955

Rugman, A. M., & Verbeke, A. (2004). A perspective on regional and global strategies of multinational enterprises. Journal of International Business Studies, 35(1), 3–18. https://doi.org/10.1057/palgrave.jibs.8400073

Schotter, A. P. J., Mudambi, R., Doz, Y. L., & Gaur, A. (2017). Boundary Spanning in Global Organizations. Journal of Management Studies, 54(4), 403–421. https://doi.org/10.1111/joms.12256

Schotter, A., & Beamish, P. W. (2013). The hassle factor: An explanation for managerial location shunning. Journal of International Business Studies, 44, 521–544. https://doi.org/10.1057/jibs.2013.7

Shen, Z., & Puig, F. (2017). Spatial dependence of the FDI entry mode decision: Empirical evidence from emerging market enterprises. Management International Review, 58(1), 171–193. https://doi.org/10.1007/s11575-017-0332-0

Shenkar, O. (2001). Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences. Journal of International Business Studies, 32(3), 519–535. https://doi.org/10.1057/palgrave.jibs.8490982

Stallkamp, M., Pinkham, B. C., Schotter, A. P. J., & Buchel, O. (2017). Core or periphery? The effects of country-of-origin agglomerations on the within-country expansion of MNEs. Journal of International Business Studies, 49(8), 942–966. https://doi.org/10.1057/s41267-016-0060-x

Tallman, S., & Li, J. (1996). Effects of international diversity and product diversity on the performance of multinational firms. Academy of Management Journal, 39(1), 179–196. https://doi.org/10.5465/256635

Tobler, W. R. (1970). A Computer Movie Simulating Urban Growth in the Detroit Region. Economic Geography, 46, 234–240. https://doi.org/10.2307/143141

UNCTAD. (1995). World investment report 1995: Transnational corporations and competitiveness. In United Nations Conference on Trade and Development (pp. 1–649). Retrieved from United Nations Conference on Trade and Development website: https://unctad.org/system/files/official-document/wir1995_en.pdf

Vachani, S. (1991). Distinguishing between related and unrelated international geographic diversification: A comprehensive measure of global diversification. Journal of International Business Studies, 22(2), 307–322. https://doi.org/10.1057/palgrave.jibs.8490305

Vernon, R. (1971). Sovereignty at bay: The multinational spread of US enterprises. New York: Harmondsworth.

Wally, S., & Becerra, M. (2001). Top management team characteristics and strategic changes in international diversification. Group & Organization Management, 26(2), 165–188. https://doi.org/10.1177/1059601101262003

Whetten, D. A. (1989). What constitutes a theoretical contribution? The Academy of Management Review, 14(4), 490–495. https://doi.org/10.2307/258554

Wiersema, M. F., & Bowen, H. P. (2011). The relationship between international diversification and firm performance: Why it remains a puzzle. Global Strategy Journal, 1(1-2), 152–170. https://doi.org/10.1002/gsj.5

Wong, D. W. S., & Lee, J. (2005). Statistical analysis of geographic information with ArcView GIS and ArcGIS. Hoboken: John Wiley & Sons.

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–363. https://doi.org/10.5465/256683

Zhang, L., Cui, L., Li, S., & Lu, J. (2018). Who rides the tide of regionalization: Examining the effect of the China-ASEAN free trade area on the exports of Chinese firms. International Business Review, 27(3), 501–513. https://doi.org/10.1016/j.ibusrev.2017.10.002

Subscription or SAM Membership Required

Share This Article

Facebook
Twitter
LinkedIn