The spatial structure of foreign subsidiaries and MNE expansion strategy

G Frank Jiang, Guy L.F Holburn, Paul W. Beamish

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)
69 Downloads (Pure)

Abstract

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.
Original languageEnglish
Pages (from-to)438-450
Number of pages13
JournalJournal of World Business
Volume51
Issue number3
Early online date24 Dec 2015
DOIs
Publication statusPublished - 30 Apr 2016

Keywords

  • Spatial transaction costs
  • Geographic distance
  • Internalization
  • Location choice

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