Extraregional Linkages and the Territorial Embeddedness of Multinational Branch Plants: Evidence from the South Tyrol Region in Northeast Italy

Abstract

This article reevaluates the regional embeddedness of multinational manufacturing branch plants in view of recent work on global production networks and extraregional links. It argues that the predominance of extraregional production linkages is not necessarily detrimental to regional economies and that such linkages can even compensate for weak territorial innovations systems in noncore regions. The arguments are supported by a case study of the South Tyrol region of Italy, using firm-level data from surveys and interviews, complemented by evidence on institutional conditions. The findings suggest that neither the branch plants nor the locally owned manufacturing firms are strongly embedded in the region in terms of material linkages and interorganizational relationships, indicating that the ownership status of firms is not a good predictor of embeddedness. Second, compared to local firms, branch plants are more innovative and hence contribute to a larger degree to regional upgrading processes. Third, South Tyrol’s core institutional structures, such as those governing the labor force, play a decisive role in the competitiveness of branch plants and therefore create codependencies that bind these producers to the territory. The results suggest a more differentiated assessment of the role of branch plants within noncore regions.