WHY MNCS LOCATE IN PARTICULAR CITIES

This research examines the motivations of multinational enterprises (MNEs) to locate subsidiaries in particular global cities. The nine European cities that provide the basis for this examination are as follow: Amsterdam, Netherlands; Berlin, Germany; Brussels, Belgium; Budapest, Hungary; London, United Kingdom; Munich, Germany; Paris, France; Prague, Czech Republic; and Vienna, Austria.

A variety of factors may motivate an MNE to locate a facility in a particular country. In some instances, such factors may be relevant to a specific market objective of the MNE, while in other instances, the motivation may involve costs of production and distribution which are relevant to the general functioning of the MNE. In all instances of MNE location in a country other than its home country, however, foreign direct investment (FDI) is involved.

A widely accepted premise is that firms expand to foreign markets in order to exploit the monopoly they possess over rent-yielding advantages such as economies of scale, and superior product and process technologies (Balasubramanyam & Greenaway, 1992). The internalization explanation of FDI, an extension to the monopoly exploiting premise, argues that, in the presence of various of market imperfections, it is advantageous for firms to internalize rather than engage in arm's-length transacti

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part of the country (in both the Flemish and the Walloon Communities) that borders Germany. The Flemish and Walloon nations within the state of Belgium resort to neither insurgency nor full-scale civil war in their conflict with one another. Rather, these two nations make demands on one another and make threats to either declare independence (the Flemish) or join another country (the Walloons and France) if their demands are not met ("Belgium's Melting Fudge," 1996). The premier of the Flemish Region has even proposed unification with the Netherlands ("Could Flanders Be Reinvented?" 1997) The ethnic-based hostility within Belgium acts as a disincentive for MNCs to locate subsidiaries in Brussels. By contrast, the location of the EU Commission in Brussels acts as a motivating factor for such location. Of the 32,000 companies based in Brussels, some 2,000 are foreign. These foreign companies are particularly active in the service sector (finance, lobbying, research, business, legal, fiscal and other services, and so forth). These companies include around 160 multinational coordination centers (Belgium: Trade and Marketing Information, 1998). Among the top foreign companies present in Brussels are 593 US firms, 433 French, 3
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Approximate Word count = 9865
Approximate Pages = 39 (250 words per page)