Week 2 [Mariotti, Piscitello & Elia, 2010] Flashcards
What are some key issues (2) of the traditional approach that firms locate near one another?
[Mariotti, Piscitello & Elia, 2010]
- ‘Geographically proximity’ (be in the neighborhood) is necessary to promote social learning, but not sufficient to generate interaction (between agents)
- ‘Interaction’ does not necessarily lead to positive spillovers (might lose knowledge, or -> if all info is shared, what is your C.A.?)
What are three (3) key factors of MNE location choice (why do they hang out next to each other)?
[Mariotti, Piscitello & Elia, 2010]
- Endowment effects
- Agglomeration effects
- Policy-induced effects
What are ‘endowment effects’?
[Mariotti, Piscitello & Elia, 2010]
Certain activities are naturally drawn to a given location
- E.g. Canada - has wood - paper factory
- E.g. Rotterdam - has port - shipping company
What are ‘agglomeration effects’?
[Mariotti, Piscitello & Elia, 2010]
Cost-effective access to specialized inputs and to knowledge spillovers
- E.g. Dublin, knowledge spillovers
- E.g. Silicon Valley, Shenzhen
What are ‘policy-induced effects’?
[Mariotti, Piscitello & Elia, 2010]
Governments subsidize the relocation to certain areas
- E.g. Brainport Eindhoven
- E.g. Kuala Lumpur tech town next to circuit
Bc; knowledge spillover -> higher income (more tax) ppl working for companies (willing to invest in e.g. infrastructure)
What is meant by ‘location cascades’?
[Mariotti, Piscitello & Elia, 2010]
MNEs imitate other MNEs as a result of information externalities
- E.g. follow IBM as “they must know what they are doing”
What is meant by ‘centrifugal and centripetal forces’?
[Mariotti, Piscitello & Elia, 2010]
MNEs may not co-locate with domestic companies as a result of knowledge spillovers.
- E.g. next to the international IBM… but not next to locals to avoid knowledge spillover
“MNEs decision-making regarding location is strongly influenced by ‘information externalities and knowledge spillovers’ “
What are two (2) examples of information externalities and knowledge spillovers?
- Location cascades
2. Centrifugal and centripetal forces
What can be said about ‘information externalities’?
[Mariotti, Piscitello & Elia, 2010]
MNEs entering a foreign country suffer from uncertainty and experience information asymmetries that result in high information costs
- Learning is key to minimize these information costs (e.g. Learn from other MNEs’ experience and adopt a mimetic behavior)
-
H1: MNEs are more likely to agglomerate w/ other MNEs due to uncertainty in the local context and the relevant information costs
What can be said about ‘knowledge spillovers?’
[Mariotti, Piscitello & Elia, 2010]
H2a: not agglomerate w/ domestic companies (knowledge outflows>inflows)
2b: 2a does not hold if domestics are comparatively advanced
2c: do agglomerate as potential knowledge spillover increases
What is a limitation of the sample of [Mariotti, Piscitello & Elia, 2010]?
Data only from Italian MNEs.
