The Regional Dimension of MNE's Foreign Subsidiary Localization

Jean-Luc Arregle (), Paul Beamish and Louis Hébert
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Jean-Luc Arregle: EDHEC - EDHEC Business School - UCL - Université catholique de Lille
Paul Beamish: UWO - University of Western Ontario
Louis Hébert: HEC Montréal - HEC Montréal

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Abstract: This paper examines the regional effect of MNEs' foreign subsidiary localization. We hypothesize that the number of subsequent foreign subsidiaries in a country is in part determined by a firm's prior foreign subsidiary activity at the regional level. We test our hypotheses using data on 1076 Japanese MNEs that created 3466 foreign subsidiaries (1837 wholly owned FDIs and 1629 joint ventures) over the period 1996–2001. We use a multilevel negative binomial approach with three levels of analysis: localization decisions in a country (49 countries), in a region (six regions) and at the headquarters level. In this way, we test the regional effects controlling for country and corporate dimensions. We also run separate models to differentiate wholly owned and joint venture localization decisions. Our results strongly support the semi-globalization perspective in that the regional-level effects are significant and different from the country-level effects for all foreign subsidiaries, for wholly owned subsidiaries and for jointly owned subsidiaries. Japanese MNEs adopt a regional perspective that complements their decisions at the country and firm levels. They seek regional agglomeration benefits and make arbitrage decisions between countries in the same region.

Date: 2009-01-01
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Citations: View citations in EconPapers (13)

Published in Journal of International Business Studies, 2009, 40 (1), 86-107 p. ⟨10.1057/jibs.2008.67⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02312684

DOI: 10.1057/jibs.2008.67

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