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Location and the multinational enterprise: John Dunning's thoughts on receiving the Journal of International Business Studies 2008 Decade Award

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Abstract

A retrospective by John H. Dunning on location and the MNE, written in the form of responses to questions posed by Rajneesh Narula in an interview recorded at the University of Reading which was shown at the JIBS Decade Award session at the AIB annual meetings in Milan, June 2008.

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Notes

  1. In fact, most tariff barriers were removed in the 1970s and 1980s, but it was not until the emergence of the European internal market in 1992 that there was a marked fall in non-tariff barriers.

  2. Also, in this same year, Seev Hirsch produced his seminal article “An international trade and investment of the firm”, which, while concentrating on the L decision of firms, also distinguished between the production and transaction costs of such decisions (Hirsch, 1976).

  3. Thus distinguishing my sphere of interest from that of Buckley and Casson (1976), Rugman (1979) and Hennart (1982).

  4. Notably the seminal article by Hirsch (1976), the theoretical insights of the Uppsala School (Johanson & Vahlne, 1977), and a large number of empirical studies in the 1970s (e.g., Buckley & Pearce, 1979; Davidson, 1980; Dunning, 1980; Horst, 1972; Kravis & Lipsey, 1982; Moxon, 1975; Root & Ahmed, 1978; Schneider & Frey, 1985; Vernon, 1974).

  5. First articulated by Behrman (1972).

  6. A full discussion of asset-seeking FDI and MNE activity with accompanying references is set out in Dunning and Lundan (2008a). As observed by Ray Vernon back in 1966, the country-specific characteristics of O advantages are also examined in some depth in Dunning (1990).

  7. But less so in the case of the more globalising metanational firm that taps the world markets for competitive-enhancing assets.

  8. As again is shown in the FDI data over the past decade, and particularly in respect of the current (2008) global slowdown in economic activity.

  9. Though there are signs that the credit crunch of 2008 is leading to a fall in cross-border M&As, at least by Western-based MNEs (UNCTAD, 2008).

  10. There is quite a wide variation in the interpretation of distance by IB scholars. Ghemawat (2001), for example, distinguishes between cultural, administrative, geographic and economic distance, while in a seminar presented at the Judge Business School in June 2008 Lars Häkanson argues that psychic distance perceptions are themselves multifaceted phenomena, and are influenced by a range of cultural, geographical and economic factors.

  11. Some scholars, for example, Hofstede (2001) and Casson (1990), prefer the use of the word “culture” to “institutions”. We use “institutions” because these are the attitudes and behavioural patterns of firms and national authorities.

  12. Throughout my own work on institutions, I have taken (quite deliberately) the interpretation of Douglass North of institutions as “formal rules (e.g., constitutions, laws and regulations) and informal constraints (norms of behaviour conventions and self-imposed codes of conduct)”. Institutions and their enforcement mechanisms set the “rules of the game” that organisations, in pursuit of their own learning and organisational goals, must follow (North, 1990, 2005).

  13. But see a recent study by Häkanson (2008) on perceived psychic distance, which reports on the findings of over 1600 questionnaire responses from managers in 25 of the world's largest companies.

  14. The contents of these and the following paragraphs draw substantially on Dunning (2008).

  15. Indeed it is quite possible that, in the next decade, these sources of investment finance could be as important as those provided by private MNEs (EIU, 2008).

  16. For example, inequities in income distribution, rising energy and food prices, unacceptable consequences for agricultural production, environmental damage, as inter alia identified and discussed by representatives attending the 2008 Davos meetings of the World Economic Forum, and the current Doha negotiations on trade liberalisation.

  17. As explored inter alia by Shenkar (2001), McCann and Mudambi (2004, 2007), Mudambi (2008) and Flores and Aguilera (2007).

  18. At the same time, in their bid to cut carbon emissions and protect themselves against supply instabilities, some of the more industrialised nations, for example, the US, are striving to reduce their dependence on imports of essential raw materials, notably oil.

  19. One notable exception is the doubling of the price of fuel oil between 1 July 2007 and 30 June 2008.

  20. Which implies that institutional distance might be an important variable influencing the regional concentration of FDI (see Dunning, Fujita, & Yakova 2007; Rugman & Verbeke, 2003).

  21. Defined as the evolving or expected medium- to long-term global competitive advantage of a country's location-bound assets relative to those possessed by other countries.

  22. The reconciliation between the advantages of globalisation and localisation, I believe, is more difficult to achieve in respect of the HE than the PE.

  23. For a study on the role of integration in affecting the location decision of firms, see Stein and Daude (2001).

  24. Other studies by Kaufmann, Kraay, and Zoido-Lobaton (1999) and Stein and Daude (2001) have shown that the quality of a country's infrastructure significantly affects the L choices of MNEs.

  25. In this case the survey was the response of some 70 senior executives of firms to a list of some 12 investment features identified in the literature. Appreciative theory is distinguished by allowing for a more complex web of causal associations that are historically grounded closer to real-life situations. At the same time it makes greater allowances for institutional and other contextual specificities. In empirical research appreciative theory tends to act in a complementary fashion to formal theory (Cantwell et al., 2008).

  26. For example, Ghoshal argues that causal theories are suspect in the presence of intentionality of human interaction – that an epistemology of common sense and of understanding of the basic phenomenon one is trying to explain is necessary before it can be formally tested. Sullivan and Daniels contrast ontological approaches, namely the scientific, humanism, and chaos theory, and conclude the latter two are becoming increasingly suitable to resolving IB-related problems.

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  1. State of New Jersey Professor of International Business at Rutgers University, United States, and Emeritus Research Professor of International Business, University of Reading, UK

    John H Dunning

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Correspondence to John H Dunning.

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Accepted by Lorraine Eden, Editor-in-Chief, 20 August 2008. This paper has been with the author for one revision.

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Dunning, J. Location and the multinational enterprise: John Dunning's thoughts on receiving the Journal of International Business Studies 2008 Decade Award. J Int Bus Stud 40, 20–34 (2009). https://doi.org/10.1057/jibs.2008.75

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