Storming the Beachhead: An Examination of Developed and Emerging Market Multinational Strategic Location Decisions in the U.S.

Denise R Dunlap,Roberto S Santos

doi:10.3390/jrfm14070325

Abstract

Entering a foreign market is challenging given the fierce competition posed by local incumbents. The literature suggests that when entering a foreign market, it is advantageous to locate where there are agglomeration benefits. Given the dynamic nature of regional development, foreign firms have multiple location options. While the literature has primarily focused on developed country multinationals’ (DMNEs) location decisions, emerging market multinationals (EMNEs) are increasingly becoming influential in high-tech industries. Due to differences in DMNE and EMNE resource endowments, they may consider alternative options when locating abroad and, thus, we examine these nuances. Using multinomial logistic regression, we investigate domestic and foreign location patterns of firms within the U.S. biopharmaceutical industry as of 2018. We constructed a unique dataset of 19,962 U.S. locations and examined the location patterns of DMNEs and EMNEs from 61 countries and territories. Given the heterogeneity of regional development in the U.S., we developed a typology that stratifies regions into four categories (developed, growth, transitioning, and nascent). Counterintuitively, we find that foreign multinationals are more likely to be attracted to less developed regions than domestic firms and have different location patterns, not only compared to domestic firms, but also with respect to each other.

Highlights

In Model 1, we examine whether foreign multinationals are more likely to locate outside of developed regions compared to domestic firms
The coefficient for emerging market multinationals (EMNEs) (b = 0.524, n.s.) is negative and insignificant. Exponentiating these results suggests that, compared to U.S firms, the odds of an EMNE locating in a growth region is 111% higher, locating in a transitioning region is 96% higher, and locating in a nascent region is not significantly different than locating in a developed region
Hypothesis 2 predicts that compared to DMNEs, EMNEs are less likely to locate in less developed regions

Summary

Introduction

Firms engage in foreign direct investment (FDI) to seek out new resources or strategic assets that their home country lacks and/or to exploit superior firm-specific capabilities Where foreign multinationals choose to locate their overseas operations has been a topic of extensive debate in the international business (IB) literature as it involves many different considerations (e.g., culture, language, institutions, etc.) 2007, 2014; Bathelt and Li 2014; Dunning and Lundan 2008; Porter 1990). There is ample evidence supporting the benefits of being geographically concentrated in specific and highly developed locations (e.g., Silicon Valley) compared to others

Methods

Results

Discussion

Conclusion