Academic journal article Management International Review

Location Choice Research: Proposing New Agenda

Academic journal article Management International Review

Location Choice Research: Proposing New Agenda

Article excerpt

Abstract Location decisions assume great significance for both managers and scholars as the choice of overseas location has the potential to either enhance or dissipate firms' profitability. The aim of the paper is to conduct a critical review of the research articles that have been published on the topic of location determinants since 1975. We analyzed 151 articles published since 1975 until September, 2015 in 17 leading management and international business journals. Our analysis suggests that a vast amount of literature on foreign direct investment (FDI) catalogues a long list of determinants that try to explain FDI by multinational companies in a particular location. However, it is noticeable that the results have, sometimes, been equivocal. Based on our analysis, we suggest that location determinants can be organized into two broad categories. We use these categories to propose a comprehensive model and four agenda that, we believe, will be helpful to both the scholarly and managerial communities. Further, we attempt to decipher some salient research questions on the basis of our analyses. Our paper enhances the literature on location decision by providing a comprehensive model and directions for future research that will be of interest to the readers of management international review.

Keywords Location choice * Location determinants * Developed country * Developing country * Foreign direct investment (FDI) * Review

1 Introduction

The scholarly research on the determinants of host country location choices by multinational companies (MNCs) assumes significance as foreign direct investment (FDI) continues to be keenly attracted by various governments to develop their countries (Brooks et al. 2010). Besides host countries, firms, too, are eager to expand overseas to benefit from the location embedded competitive advantages. Given this, in past several decades, especially after Johanson and Wiedersheim-Paul's (1975) seminal work on the overseas locations chosen by Swedish MNCs, the location literature has received a definite boost. For example, our search of the literature resulted in a total of 151 publications (1) on location determinants in 17 leading management and international business journals in the past 40 years between 1975 (after Johanson and Wiedersheim-Paul's article) and September, 2015.

The stupendous progress in the literature has produced valuable insights into the determinants of location choices of MNCs. However, a disparate use of these determinants has us believe that a systematic categorization of these determinants and their unification into a comprehensive model are likely to advance the location choice literature. Keeping this in mind, this paper conducts a synthesized review of the 151 articles. In doing so, we also identify and address some issues pertaining to the variables used in the literature.

We categorize various location determinants under two broad categories. The first broad category has been labeled as firm- and industry-specific location determinants whereas the second category has been named as country-specific location determinants. For drawing our comprehensive model, we borrow from Dunning's (1998) eclectic paradigm. Our model includes two steps, as shown in Fig. 1. In the first step, we identify some firm- and industry-specific location determinants that facilitate MNCs' resource exploitation or exploration internationally. Facilitated by the determinants in the first step, firms, if they want to internationalize, proceed to the second step of the model where they examine country-specific location determinants to evaluate the attractiveness (or unattractiveness) of a host country for resource deployment. As a result of the evaluation, if the answer in step 2 is a 'yes' (which would mean that host country or city appears attractive), the firm chooses that location, and if the answer is a 'no', the firm rejects that location. In so doing, we provide a coherent categorization of determinants on the basis of their firm, industry or country specificity. …

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