Firm-location dynamics and subnational institutions: creating a framework for collocation activities

Abstract

The dynamic interaction between locational attributes and foreign direct investment (FDI) is an important condition for successful economic activity. Yet while significant research has identified the integral role of socio-spatial aspects to the duration, composition and performance of multinational enterprise (MNE) activity, there is limited understanding of how subnational regions coordinate with investment. This paper seeks to explore how subnational regions, and their composite institutions, function in coordinating - or not - to attract multinational investment and facilitate collocation advantages. Using case study analysis of two subnational regions within a single advanced economy, we illustrate the potential variation and implications of subnational institutional structure, posturing and engagement with FDI. Our findings are discussed in terms of the role of subnational variation for MNEs and insights to industrial policy for developed countries.