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Does It Matter Where Countries Are? Proximity to Knowledge, Markets and Resources, and MNE Location Choices

Author

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  • Lilach Nachum

    (Baruch College, City University of New York, New York, New York 10010)

  • Srilata Zaheer

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • Shulamith Gross

    (Baruch College, City University of New York, New York, New York 10010)

Abstract

We suggest that the proximity of a country to other countries is a factor that affects its choice as a multinational enterprise (MNE) location. We introduce the concept of a country's proximity to the global distribution of knowledge, markets, and resources, and frame this concept as a function of both geographic distance and the worldwide spatial distribution of these factors. We test our location model on a data set comprising 138,050 investments undertaken by U.S. MNEs worldwide. Our findings show that the proximity of a country to the rest of the world has a positive impact on MNEs choosing that country as a location. Proximity to the world's knowledge and markets are stronger drivers of location choice than is proximity to the world's resources, after accounting for the country's own endowments. Larger firms are able to benefit more from remote locations than smaller firms are.

Suggested Citation

  • Lilach Nachum & Srilata Zaheer & Shulamith Gross, 2008. "Does It Matter Where Countries Are? Proximity to Knowledge, Markets and Resources, and MNE Location Choices," Management Science, INFORMS, vol. 54(7), pages 1252-1265, July.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:7:p:1252-1265
    DOI: 10.1287/mnsc.1080.0865
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