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Multinational Enterprises and Social Capital as Location Factor: A Review

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  • Kurt Pedersen
  • Gunnar Lind Haase Svendsen
  • Gert Tinggaard Svendsen

Abstract

It is generally assumed that multinational enterprises (MNEs) are more volatile than local firms. From the viewpoint of host countries, the volatility of MNE subsidiaries is often seen as a problem. Therefore it becomes relevant to look for ways to reduce the volatility of multinational activity across borders. We review the literature and identify a gap regarding social capital as a potential instrument for reducing the level of volatility. An existing stock of social capital may be advantageous not only to the host country but also to the MNE in the sense that optimal in-company resource allocation and profits could be improved even further. Thus, the dominating theory of FDI (Foreign Direct Investment), the eclectic paradigm as developed by John Dunning, offers a relevant opportunity to fill a gap in the literature and include social capital in FDI decisions as a new location factor.

Suggested Citation

  • Kurt Pedersen & Gunnar Lind Haase Svendsen & Gert Tinggaard Svendsen, 2013. "Multinational Enterprises and Social Capital as Location Factor: A Review," Business and Management Research, Business and Management Research, Sciedu Press, vol. 2(3), pages 81-89, September.
    • Handle: RePEc:jfr:bmr111:v:2:y:2013:i:3:p:81-89
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    References listed on IDEAS

    as
    1. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
    2. Birger Wernerfelt, 1984. "A resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 5(2), pages 171-180, April.
    3. Tove Brink & Gunnar Lind Haase Svendsen, 2013. "Social Capital or Waste of Time ? Social Networks, Social Capital and ¡®Unconventional Alliances¡¯ among Danish Rural Entrepreneurs," Business and Management Research, Business and Management Research, Sciedu Press, vol. 2(1), pages 55-68, March.
    4. Peter Graeff & Gert Svendsen, 2013. "Trust and corruption: The influence of positive and negative social capital on the economic development in the European Union," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(5), pages 2829-2846, August.
    5. Paldam, Martin & Svendsen, Gert Tinggaard, 2000. "An essay on social capital: looking for the fire behind the smoke," European Journal of Political Economy, Elsevier, vol. 16(2), pages 339-366, June.
    6. Gunnar L.H Svendsen & Gert T. Svendsen, 2004. "The Creation and Destruction of Social Capital," Books, Edward Elgar Publishing, number 3276.
    7. Peter J. Buckley & Mark Casson, 1985. "The Economic Theory of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-05242-4.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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