The Theory of the Multinational Enterprise: An Application to Multinational Office Location

The forces that affect growth, location, and distribution in the service sector will have elements in common with those at work in manufacturing, but equally will exhibit certain unique features. This paper examines such forces in the specific context of location choices made by offices of multinational enterprises (MNEs). Such enterprises emerge in response to particular market imperfections and to exploit particular ‘ownership specific’ advantages. The nature of such ownership specific advantages is discussed with specific reference to MNE office location, and tested using data drawn from a survey of European offices of mainly US-based MNEs. It is shown that a distinction must be drawn between offices that provide a service for final consumption and those that provide a mainly coordinating role. The former types of office are shown to be heavily market oriented and to act in ways consistent with theory. The latter types of office are more complex, but again locate in ways consistent with theory; in particular they are influenced more by accessibility and by environment than by cost and geography.