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The hassle factor: An explanation for managerial location shunning

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Abstract

This study investigates the widely overlooked phenomenon of multinational enterprise (MNE) location avoidance, utilizing a multi-method research design and data on 131 foreign investment locations. It complements economic-choice-based location research by adding contextual dimensions at the country level that matter to managers personally, and affect decisions at the firm level. We provide a connection between international business research, the behavioral stream in economic geography, and the microfoundations stream in the strategic management literature. The results suggest that, in addition to traditional location choice criteria (including investment potential, internationalization strategy, and various geographic and psychic distances), foreign location decisions in MNEs are influenced by how troublesome it is for managers to travel to or live in certain places. An 11-item measure composed of travel inconveniences shows a significant negative moderating effect on the relationship between foreign direct investment potential and investment intensity. The effect is stronger for non-resource-seeking industries. We call this phenomenon the “hassle factor”.

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Notes

  1. For an extensive overview of previous location choice research see Appendix A in Buckley et al. (2007).

  2. We gratefully acknowledge an anonymous reviewer for pointing this out.

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Acknowledgements

This research was supported by the Social Sciences and Humanities Research Council of Canada (grant #411-98-0393). We thank Nathaniel Lupton and Vanessa Hasse for their support during various stages of this research. In addition, we thank the discussants, commentators, and participants of the JIBS special issue conference at Temple University in Philadelphia and the anonymous reviewers for the valuable comments and suggestions. Finally, we gratefully acknowledge the continuous, encouraging support and insightful feedback of the special issue editors Ram Mudambi and Sjoerd Beugelsdijk, and JIBS editor John Cantwell.

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Authors and Affiliations

  1. Thunderbird School of Global Management, Glendale, USA

    Andreas Schotter

  2. Ivey Business School, Western University, Canada

    Paul W Beamish

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Accepted by Ram Mudambi and Sjoerd Beugelsdijk, Guest Editors, 6 January 2013. This paper has been with the authors for two revisions.

Appendices

APPENDIX A

Examples of managerial location decision influencing

illustration

figure a

APPENDIX B

Examples of Location Hassles and Managerial Perceptions

In the following case examples, countries mentioned are in italic.

Pre-visit and travel

Visas and permits

  1. 1)

    We gave up on Angola. It was too difficult to obtain a visa. They keep our passports forever. We did one project; never again.

  2. 2)

    In Jamaica, I was responsible for a project in Kingston, but will not go back. It was too difficult getting any business visa or permit.

  3. 3)

    We canceled our plan to put a global R&D center up in the United States; we had difficulties getting some of our Asian engineers in there for work.

Air travel

  1. 1)

    I do not like connecting flights, and avoid them as much as possible. This makes me go to some places more frequently and others less frequently. Even in the United States we prefer the larger hubs.

  2. 2)

    When my company needed to decide whether to build a China factory in Shanghai or Beijing, the boss chose Beijing, because at the time there was no direct Lufthansa flight to Shanghai. I wished we would be in Shanghai. The business is there but we are stuck.

  3. 3)

    Mumbai in India is a problem, because most international flights arrive between 2am and 3am.

Vaccinations

  1. 1)

    Insisting on vaccinations for which I have an allergic reaction was a showstopper. So Nigeria, for example, was crossed off the list as potential investment location.

  2. 2)

    I dislike taking Malaria medication. The side effects are too bad. I avoid going wherever I need to take it.

In country

Business facilitation

  1. 1)

    We currently manufacture in China and export to the United States. We avoid certain countries even though manufacturing costs are lower due to the hassle of doing business there. In some places you never know who is in charge. Vietnam looks good on the surface but getting to the right person is troublesome. The same applies in a way to Japan although on a different level.

  2. 2)

    In The Philippines I find it difficult confirming the actual end customer in business arrangements. It seems there is an endless chain of middlemen. I do not like going there. It seems a waste of time.

Food and water

  1. 1)

    I am very sensitive to food. I do not like that in China everything has something meaty in it. Even a clear soup.

  2. 2)

    When I travel I only drink imported water or Coke. I do not go to places where I have no control over my food choices.

  3. 3)

    No more Bangladesh for me. I got a bad food poisoning there once. I keep pushing other places and avoid talking about opportunities there with the boss.

Language

  1. 1)

    Using an interpreter creates a layer of complexity that does not make you feel really close to the people. Japan can be difficult and also Korea.

  2. 2)

    I find it frustrating to do business in Brazil. I was really surprised how bad the average English skills are over there. It is fine talking to some big shot or some individual guys, but if you have a group of people to deal with in a company, the lack of English becomes a hassle.

Health risks

  1. 1)

    I am really concerned about getting some tropical diseases, but the air pollution in some places is even worse to me. No way I am staying one day longer in China than I must. It used to be Bangkok that was bad, but compared with Beijing it feels like a Swiss mountain village.

  2. 2)

    Dengue fever really scares me. I was shocked to learn that it is bad in the United States, especially in Texas and Florida. I do not travel there in the summer any more.

  3. 3)

    Some places are a bit wild, and I do not want to end up in a local hospital. Indonesia concerns me. I try to have an escape plan. For example in Indonesia, I always carry a list of flights and an open ticket to Singapore with me.

Climate

  1. 1)

    I only go to those tropical places where I can be constantly in an air-conditioned environment. Indonesia can be bad and so are the Philippines. I avoid going there during the monsoon season.

  2. 2)

    The rainy season in Panama lasts forever. Everything comes to a stop in a bad rainstorm. The place might have potential, but I am not convinced that we need our own operation there.

Local transportation

  1. 1)

    Our regional manager in Asia did not like to travel to India because of the difficulties of getting around. Instead, he liked traveling to the Philippines and Singapore. All investment proposals were skewed toward these two Asian countries. Once he left his post we had a lot of catching up to do in India.

  2. 2)

    I avoid Kenya. The traffic is horrendous at all times of day and night. The airport is extremely disorganized, with poor-quality staff.

  3. 3)

    It is funny some places have a great airports, but getting from these airports to the city can take forever. Narita (Tokyo) in Japan, for example, or Incheon (Seoul) in Korea.

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Schotter, A., Beamish, P. The hassle factor: An explanation for managerial location shunning. J Int Bus Stud 44, 521–544 (2013). https://doi.org/10.1057/jibs.2013.7

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