Drawing on internalization theory and economic geography research, we examine how the spatial structure of MNE subsidiaries in supranational regions affects subsidiary location choices. Our analysis of foreign production investments by Japanese manufacturing firms from 1971 to 2006 supports our theoretical predictions: firms were more likely to establish new production subsidiaries in countries geographically more proximate to existing production subsidiaries, but not to trading subsidiaries, in the same region. The proximity effect diminished for production subsidiaries engaged in accessing natural resources or R&D. Performance of production subsidiaries was also stronger for those closer to other production subsidiaries in the same region.
|Number of pages||13|
|Journal||Journal of World Business|
|Early online date||24 Dec 2015|
|Publication status||Published (in print/issue) - 30 Apr 2016|
- Spatial transaction costs
- Geographic distance
- Location choice