MNCs

Question 1

Question: What is “Mountain Tectonics in a Flat World”?

Answer 1

highlights the importance of proximity in shaping economic activities, encompassing cognitive, organizational, social, and institutional dimensions beyond physical distance in a globalized context.

Question 2

Cognitive Proximity

Answer 2

Knowledge and innovations often emerge from cumulative, localized processes within firms. Tacit knowledge, which is not easily codified, is essential. Firms that share similar knowledge bases are more likely to collaborate and drive innovation.

Question 3

Organizational Proximity

Answer 3

Practices that enable interactive learning and collaboration play a key role. Close interactions between firms, suppliers, and customers foster mutual learning and innovation.

Question 4

Social Proximity

Answer 4

Economic activities are embedded in a social context. Shared cultural norms, values, and social networks can facilitate cooperation and knowledge exchange.

Question 5

Institutional Proximity

Answer 5

Similar institutions providing support for economic coordination enhance collaboration. Legal frameworks, regulations, and industry standards can facilitate interactions.

Question 6

Does the idea of “Mountain Tectonics in a Flat World” negate the concept of the “death of distance”?

Answer 6

The idea of the “death of distance,” suggesting that technology erases geographical barriers, is partially true.
While technology has certainly reduced the importance of physical distance, other dimensions of proximity remain highly relevant.
Cognitive, organizational, social, and institutional proximity continue to shape economic interactions and the clustering of activities.

Question 7

Question: What are agglomeration effects?

Answer 7

Answer: Agglomeration effects refer to the clustering of economic activities in certain areas due to factors such as skilled labor, infrastructure, and specialized suppliers. This clustering can create both growth and disparities between regions.

Question 8

Question: How does trade opening impact economic geography?

Answer 8

Answer: When a country opens up to trade, core regions tend to expand their influence into surrounding areas, which can lead to a core-periphery pattern with prosperous core areas and less developed peripheries.

Question 9

Question: What are backward and forward linkages?

Answer 9

Answer: Backward linkages are connections between suppliers and buyers, while forward linkages involve connections between producers and consumers. Strong linkages can create positive feedback loops that contribute to regional growth.

Question 10

Question: How do market size and transport costs influence economic geography?

Answer 10

Answer: Larger markets attract economic activity due to increased sales potential, and reduced transportation costs from improved infrastructure facilitate efficient distribution of goods and services.

Question 11

Question: How does the ‘New Economic Geography’ theory impact economic growth?

Answer 11

Answer: The theory highlights the interactions between agglomeration and dispersion, and how these factors contribute to the distribution of economic activities and growth patterns in different regions.

Question 12

Question: What is the difference between specialization and diversification in economic development?

Answer 12

Answer: Specialization involves focusing efforts on a specific industry, while diversification spreads investments across various sectors to mitigate risks.

Question 13

Question: Explain the concept of Marshall-Arrow-Romer (MAR) externalities.

Answer 13

Answer: MAR externalities suggest that firms within the same industry cluster benefit from localized knowledge sharing, leading to increased productivity and competitiveness.

Question 14

Question: What are Jacobian externalities?

Answer 14

Answer: Jacobian externalities refer to the positive interactions between related industries in a cluster, where growth in one industry stimulates demand in others.

Question 15

Question: How does the capability to exploit externalities influence cluster development?

Answer 15

weak institutions or unfavorable regulations

Question 16

Question: How do linkages and the correct mix of specialization contribute to economic development in metropolitan areas?

Answer 16

Answer: Well-developed linkages enable metropolitan areas to achieve a balanced mix of specialization and diversification, fostering innovation and competitiveness across industries.

Question 17

why does a firm become an MNE (OLI)

Answer 17

Ownership - This refers to what makes a company special compared to other local businesses. It could be unique skills, technologies, or resources that give the company an edge.

Location - This means the benefits of setting up a business in a specific foreign country. It could be a large market, lower costs, skilled labor, or favorable regulations.

Internalization Advantages (I): This is about deciding how to do business abroad. Sometimes it’s better to handle things within the company rather than relying on others in the market.

Question 18

objectives of an MNE

Answer 18

• Natural Resources: Companies might want to tap into a country’s resources, like minerals or oil, because they’re valuable and easy to access.
• Market Potential: If a country has a big and growing market, businesses might want to expand there to sell more products.
• Efficiency: If labor is cheaper or more productive in a foreign country, it can be more cost-effective to produce goods there.
• Strategic Assets: Companies might expand to access local knowledge, build connections, or use good transportation networks.

Question 19

Question: What are location determinants for multinational enterprises (MNEs)?

Answer 19

Answer: Location determinants are factors that influence where MNEs choose to invest. These include property rights, political stability, absence of violence, and control of corruption.

Question 20

Question: Can you provide an example of resource-seeking investments by MNEs?

Answer 20

Answer: Sure, cross-border investments in natural resources have a long history and remain important. For instance, China’s MNEs are investing in Africa to secure raw materials due to China’s high demand for resources.

Question 21

Question: Why is the concept of property rights crucial for resource-seeking MNEs?

Answer 21

Answer: Property rights are critical in the resource sector due to the risk of expropriation, where investments could be taken away unfairly. This risk makes property rights particularly important in these investments.