The Routledge Companion to the Geography of International Business

Gary Cook, Jennifer Johns, Frank McDonald, Jonathan Beaverstock, Naresh Pandit, Gary Cook, Jennifer Johns, Frank McDonald, Jonathan Beaverstock, Naresh Pandit, Gary Cook, Jennifer Johns, Frank McDonald, Jonathan Beaverstock, Naresh Pandit

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781317357919
• Edition: 1
• Topic: Business
• Subtopic: International Business
• Index: Business

The fields of Economic Geography and International Business share an interest in the same phenomena, whilst each provides both a differing perspective and different research methods in attempting to understand those phenomena.

The Routledge Companion to the Geography of International Business explores the nature and scope of inter-disciplinary work between Economic Geography and International Business in explaining the central issues in the international economy. Contributions written by leading specialists in each field (including some chapters written by inter-disciplinary teams) focus on the nature of multinational firms and their strategies, where they choose to locate their activities, how they create and manage international networks and the key relationships between multinationals and the places where they place their operations. Topics covered include the internationalisation of service industries, the influence of location on the competitiveness of firms and the economic dynamism of regions and where economic activity takes place and how knowledge, goods and services flow between locations.

The book examines the areas for fruitful inter-disciplinary work between International Business and Economic Geography and sets out a road map for future joint research, and is an essential resource for students and practitioners of International Business and Economic Development.

p.1

1

INTRODUCTION TO THE COMPANION

Gary Cook, Frank McDonald, Jennifer Johns, Jonathan Beaverstock and Naresh Pandit

The genesis of the Companion

This edited collection was first proposed to Gary Cook in the autumn of 2014 by Routledge Commissioning Editor Terry Clague. Cook’s own journey in exploring the interface between Economic Geography (EG) and International Business (IB) and the connections he has forged with the other editors of this volume (and many of the contributors) shed light on the many areas for fruitful interaction between the two disciplines and, more broadly, with economics and management. Cook and Pandit were contemporaries on the PhD programme at Manchester Business School and, indeed, shared the same PhD supervisor, Tony Cockerill, and have a common background in Industrial Economics. In 1996 they embarked on a stream of work, which continues to the current day into industrial clusters, in the first case in connection with a European Commission Funded project led by Peter Swann. Their initial work was a large scale econometric analysis of the links between cluster strength and firm growth rates and the prospects for surviving new firm start-ups, focusing on the Financial Services and Broadcasting industries. The positive correlations were strongly evident. The choice of sectors was not random. An important question – and one which finds some echoes in this Companion – is whether patterns evident in manufacturing industries would also be found in service industries. In broad outline, results were very consistent with those found in parallel projects on computing, biotechnology and aerospace.

Finding significant correlations and patterns which seemed to be mirrored across a range of industries was gratifying, but only to a limited degree. As the commonplace has it: correlation is not causation. The next project built on the “black box econometrics” through a comparative case study analysis of Financial Services and Broadcasting, based entirely on qualitative methods, which sought to identify whether there were real processes of “agglomeration economies” at work (the correlations could have been spurious for several reasons, including being just random or due to some third factor which did not involve spillovers between firms). Should there be real processes at work, then, of course, the key research question was: what were the processes driving the positive effects being picked up in the statistics? The design was to examine London, by far the dominant agglomeration in both industries and a leading example of a major node in a global network in the sense of Amin and Thrift (1992) and both undeniably meaningful clusters bearing comparison with the paradigmatic Silicon Valley (Saxenian, 1994). London was to be compared with Bristol (dynamic in Broadcasting but not Financial Services) and Edinburgh-Glasgow (dynamic in Financial Services but much less so in Broadcasting). In order to make this comparison of differences in regional dynamism at sub-national scale, the literature in EG became essential, with its emphasis on variegation and the particularities of the historical and institutional context. By the same token, it was very heartening for two Industrial Economists to discover that the particularities of industry mattered too!

p.2

Cook met Jon Beaverstock when they both worked at Loughborough University. Beaverstock was in the Department of Geography and had spent many years crafting his research on the internationalisation of banking and professional services firms, and the competitiveness of the City of London and Singapore as global financial centres. In particular, Beaverstock’s interest in IB was first stimulated by reading John Dunning and Peter Buckley’s work in the late 1980s, and the theoretical foundation of his PhD in Economic Geography from the University of Bristol (1990) was heavily influenced by Dunning and others who used the OLI paradigm to explain the internationalisation of business services. Jon’s work has always blended the softer and qualitative aspects of IB with EG and his latest research monograph on the internationalisation of executive search (Beaverstock et al., 2015) exemplifies neatly the contribution that EG and IB can make to explain the internationalisation of the firm. In a chat over coffee at Loughborough University in the early 2000s, Cook and Beaverstock soon discovered that they had areas of common interest. What followed was a substantial project on clustering in the City of London, jointly with Pandit and Peter J. Taylor (see Chapter 15 in this companion). This was instructive in several ways. First, it established that business scholars and economic and political geographers can work well together and that their differing perspectives are complementary. The world cities perspective and the relational turn were revelations to Cook and Pandit. It also showed that joint working is not always a simple matter, as each side makes taken-for-granted assumptions that can be impenetrable to the other. These are not insurmountable, but they can be subtle and rather baffling. The project brought into sharp relief the particular importance of multinationals in clusters and of clusters to multinationals. It also made very concrete the geographer’s emphasis on processes taking place at a range of spatial scales. This started Cook and Pandit on a trajectory linking EG and IB, which is still going full steam ahead and along which this Companion is an important staging post. One of Cook’s abiding memories of this immersion into the literature of EG is how difficult it was to build a conceptual map of the field. This was mainly due to the more heterodox nature of the field (see Chapter 7 by Barnes and Sheppard), which contrasts with the more structured coalescence around core models and assumptions in IB (and Economics). It was also, in part, due to a lack of appreciation of the core concerns of Economic Geographers and how they differ from those of IB scholars, not just in terms of the substantive issues addressed by research, but also doctrinal positions taken in terms of methodology and epistemology.

Cook met Jennifer Johns somewhat by accident at the University of Liverpool. Jennifer received her EG training at the University of Manchester. Jennifer was programme director for the Geography and Management degree and Cook needed to consult with her in preparing the annual programme review for undergraduate programmes in Management. Again, it quickly emerged that we had common interests, above all in clustering in the broadcasting industry. A joint research project on MediaCity quickly followed. It was also part of a process by which Jennifer made her move out of the Geography Department. Precipitated by University-wide restructuring, Jennifer moved into the Management School and continued to teach much the same material on the global economy, perpetuating sales of Global Shift. Having worked with Peter Dicken, Neil Coe, Henry Yeung and Martin Hess on Global Production Networks (GPNs) and completed a PhD on networks and agglomeration in creative industry, Jennifer’s work has tended to take the firm as the initial unit of analysis. This made her work more understandable – at least at first glance – to her new colleagues in IB and management generally.

p.3

Beaverstock was, a little later, to make the same transition, moving to the Department of Management at Bristol University, from a Chair in Geography at the University of Nottingham. More comments on this exodus of Economic Geographers to Management Schools occur later in this introduction. Johns and Cook organised a special session on Geography and Management at the Royal Geographical Society – Institute of British Geographers conference in 2013, which attracted strong interest. One thing which sticks in Cook’s mind about that session is the trepidation that several of the geographers expressed about possibly having to “sell their soul to the devil” if they dabbled in the management field, being constrained by the need to adopt a “managerialist” perspective. Johns remembers an air of cautious excitement about the potential scope for engagement between the disciplines and a strong sense of greater job security in more profitable, and expanding management and business schools where funding for research activities is often much greater than in geography departments.

Once the connections between clusters, EG and IB had been made, Cook became a regular attendee at the Academy of International Business conferences and made the acquaintance of Frank McDonald, the then President of the Academy of International Business UK & Ireland Chapter. Frank was then, and remains, highly interested in the links between EG and IB, and many of his thoughts are reflected in this introduction. The Chapter endorsed the University of Liverpool to organise the 2012 UK & Ireland Conference, and Frank made a particular request that it should be focused on the linkages between EG and IB. Accordingly, a special arrangement was made with the Economic Geography Research Group of the Royal Geographical Society and there was a good attendance by geographers at the conference, as well as a very well attended panel session and special paper sessions. An edited book captured the diverse contributions (Cook & Johns, 2013).

The Conference was fortunate to attract two excellent keynote speakers, who have spanned the two fields, Ram Mudambi from the IB side and Henry Yeung from the EG side. Both placed emphasis on the uneven and particular geographic distribution of economic activity. Henry Yeung spoke of the need to fuse the spatial perspective of EG with the agency of firms, which is central to the IB perspective. Putting it in a nutshell, he spoke of the geographic pattern of activity as being both a cause of and an outcome of International Business activity. He also offered a salutary reminder that the particular patterning of economic activity around the globe is also conditioned by physical, not just human geography. He also placed emphasis on the tendency in IB to downplay or ignore completely the interaction between firms and their particular locations. He contrasted the typical conception of space in IB, as a physical container (the region, the nation state) within which activity takes place, with the relational perspective in EG, where a key defining feature of what makes one spatial unit what it is, is its relationship to other spatial units. MNEs are important agents which link one physical space to another. It was clear from Yeung’s presentation that the issues of power and embeddedness in the local context feature more prominently in Economic Geographical discourses and analysis than they do in IB, especially the nature and reality of power relationships. He also gave a rich analysis of how MNEs from emerging economies in South East Asia derive home-based advantages from the countries and the region in which they originate.

Yeung gave a very insightful analysis of how concepts from EG, enshrined in the theory of GPNs, enrich the analysis of firm strategies (see Chapters 9 and 16 in this Companion). A repeated phrase used by Yeung still resonates: IB, the phenomenon, is bigger than IB, the discipline. This crystallises the core rationale for this Companion, which seeks to identify how the boundaries of IB, the discipline, might be usefully extended by incorporating ideas from EG, in order to better comprehend IB, the phenomenon. In summary, Yeung set out three challenges for the disciplines of IB and EG, answers to which are presented in the epilogue to this companion:

p.4

1 To explain the critical links between regions and the global economy, particularly through the lens of firms and their production networks.

2 To use a transdisciplinary perspective to understand flows and relations across space and their significance, moving beyond the agency(firm)-centric views of IB and Economics.

3 To transform knowledge in IB through engagement and connectivity.

Mudambi contrasted what he called the World of Yesterday, post-industrial revolution up to roughly the 1980s, with what he called the World of Today. The World of Yesterday was characterised by generally rising equality within nations and regions, but a growing disparity in income levels between the industrialised and developing and under-developed countries. The World of Today is witnessing a rapid rise in income equality as many emerging economies catch up quickly, but by rising inequality within countries. Mudambi attributes the foundation of this regime shift to a fall in spatial transaction costs, which have given rise to a geographic dispersal of higher-value-added activity and also a process of vertical disintegration of activities. He argues that Global Value Chains are a key theoretical lens through which to analyse the changes at work in the World of Today. The dispersal and disintegration of activities, as acts of strategy by MNEs, have contributed to the economic development of those countries and regions to which they have both made foreign direct investments (FDI) and to which they have subcontracted work. These positive spillovers have occurred through a variety of well-known channels such as training and turnover of labour, training of local suppliers, and imitation and unintended knowledge spillovers. This puts the spotlight on the abiding importance of the agency of firms, central to the concerns of IB the discipline, but recognising that the fortunes of firm and the spaces and places in which they act are inextricably linked. Acknowledging another key theme of EG, Mudambi also argued that the connections between key agglomerations was integral both to the success of those agglomerations and the functioning of the global economic system. He ended by claiming that the changes now being witnessed are every bit as profound as those ushered in by the Industrial Revolution, which shifted the basis of economic power from the control of land to the control of physical capital, and its control within certain privileged countries. The World of Today is seeing the shift towards the possession of human rather than physical capital, and the privileged locations are not confined to a small number of key countries but a more broadly dispersed set of agglomerations.

Summarising so far, the personal odyssey of the editorial team establishes some key propositions which variously represent key opportunities and challenges which interdisciplinary work between EG and also some key issues which this Companion seeks to address. The epilogue outlines how this Companion has addressed these propositions and challenges.

1 Both IB and EG scholars have developed powerful insights into IB, the phenomenon, both in terms of theory and conceptualisation and an empirical literature. An increasing number of scholars in each discipline are seeing the “elephant in the room”, that each is seeing only part of the “elephant”, albeit a significant part.

2 Each side needs to understand the key assumption the other is making, key frames of reference and the key questions each is interested in. Neither need agree with the substance of these things, or the importance placed on them, but there can be no proper engagement with the other field without understanding what they are. The conceptualisation of space is emblematic in this regard.

p.5

3 Engagement and debate are constructive and helpful. At the very least, they force scholars to reappraise the validity of their taken-for-granted assumptions. Few who heard Henry Yeung’s analysis of the shortcomings of the agency-centric analysis of IB would deny that he made valuable and insightful observations and that they were helpful to IB scholars in improving their understanding. Yeung also exemplifies the importance of assembling careful argument and evidence to convince the uninitiated that the missing elements from another discipline really do matter for the questions they are researching and the phenomena they are studying.

4 There is much common cause between the two fields in seeking to understand the current (and current change in) the IB/economic system. The common broad research area has been defined as the aim to ‘increase our understanding of the spatial and historical evolution of MNEs and current change dynamics in the global economic environment’ (Johns et al., 2015, p. 78). Here there are a number of key substantive research questions of mutual interest around that broad theme:

a What are the changes which firms are making in terms of their international strategies? This spans many issues such as: what activities are being outsourced, which offshored and which both outsourced and offshored; to where are overseas investments being directed and sub-contracts awarded; how do MNEs control their organisations?

b How and why do MNEs from emerging economies succeed and what are the implications for global GDP and its distribution? What are the implications for the strategies of MNEs from developed economies?

5 There is a general fear about IB being too “managerialist” for Economic Geographers, who are more strongly wedded to a critical perspective. However, critical perspectives are not “off limits” in IB and the journal Critical Perspectives on International Business, founded in 2005, is alive and well and sponsors a prize at the Academy of International Business UK & Ireland Chapter Conference.

6 The common ground between IB and EG has been expanded by the acceptance of the institutional view into the mainstream of IB. As the dispersal of activity in production, consumption and R&D takes place, firms and academic observers are coming to a deeper understanding of the importance of institutions and culture in IB. The dominant frameworks, Scott’s (2001) “three pillars” and the isomorphism framework of DiMaggio and Powell (1983) are both rooted in sociology, from which EG also draws its institutional underpinnings.

A framework for the Companion

Some reflections on IB and EG from the IB perspective

Foundational work in IB theory considers the influence of geographical factors for the location decisions of multinational corporations (MNCs). The geographical analysis centres on the competitive advantages arising from differences in the characteristics of national distributions o...

Table of contents

• Cover Page
• Praise
• Dedication
• The Routledge Companion to the Geography of International Business
• Routledge Companions in Business, Management and Accounting
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Notes on Contributors
• 1 Introduction to the Companion
• Part I Some Core Material in International Business
• Part II Some Core Material in Economic Geography
• Part III the Interface Between Economic Geography and International Business
• Part IV Key Research at the Interface of International Business and Economic Geography
• Part V Location and Competitiveness
• Part VI Services, International Business and Economic Geography
• Part VII Epilogue
• Index