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Adjustment strategies of multinational enterprises to changing national competitiveness

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  • Christian Bellak

Abstract

This article establishes a link between four combinations of relative firm-specific advantages and comparative advantage and the adjustment strategies of multinational firms. Based on the distribution of firms across advantage combinations, hypotheses on four adjustment strategies are developed: expansion, rationalization, exit and relocation. Upon a detailed analysis of a representative sample of manufacturing firms for 1990-2000, a consistent competitiveness ranking of domestic and foreign firms across industries and over time is derived. The strategies followed by the firms are reflected by the development of employment, value-added and exports. Results show that firms are not distributed entirely in line with comparative advantage, but the dynamic interaction ("match") of location-advantage and firm-specific advantage seems to be decisive. Results also confirm that domestic and foreign firms partly react differently under a given advantage combination. The following principles for location policies are suggested: the empirically measured mismatch of firm capabilities and location advantages determine when direct and indirect measures should be used. The intensity of policy measures should be oriented towards the competitiveness ranking derived.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 12 (2005)
Issue (Month): 1 ()
Pages: 139-162

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Handle: RePEc:taf:ijecbs:v:12:y:2005:i:1:p:139-162

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Related research

Keywords: Foreign Direct Investment; Multinational Enterprises; Competitiveness; Manufacturing; Country Study; JEL Classification: F10; F23; H540;

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References

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  1. David Audretsch, 1994. "Business Survival and the Decision to Exit," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 125-137.
  2. Neven, D. & Siotis, G., 1996. "Technology sourcing and FDI in the EC: An empirical evaluation," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 543-560, July.
  3. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  4. Krugman, Paul R, 1993. "On the Relationship between Trade Theory and Location Theory," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 110-22, June.
  5. Patel, Pari & Vega, Modesto, 1999. "Patterns of internationalisation of corporate technology: location vs. home country advantages1," Research Policy, Elsevier, vol. 28(2-3), pages 145-155, March.
  6. Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310, Octomber.
  7. Globerman, Steven & Kokko, Ari & Sjöholm, Fredrik, 1996. "Technology Sourcing in Swedish MNEs and SMEs: Evidence from Patent Data," Working Paper Series in Economics and Finance 125, Stockholm School of Economics.
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Cited by:
  1. Christian Bellak & Michael Pfaffermayr & Michael Wild, 2005. "Effekte ausländischer Übernahmen. Wirkungen auf Wachstum und Produktivität der übernommenen österreichischen Unternehmen (Berichte und Dokumente)," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 31(1), pages 113-124.
  2. Christian Bellak & Wilfried Altzinger, 2005. "Bestehen Unterschiede zwischen in- und ausländischen Unternehmensübernahmen? Eine Studie anhand von sieben Fallbeispielen," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 31(4), pages 535-554.

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