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ECONOMIC GEOGRAPHY AND INTERNATIONAL BUSINESS
Henry Wai-chung Yeung
Introduction
The development and emergence of economic-geographical studies of International Business activities is an important topic. As these cross-border intra- and inter-firm activities are becoming more globally interconnected and interdependent today, their management and governance by firms, states and other institutions is much more challenging and complex. The geographical foundations and specificities of this phenomenon in a globalizing era has become a crucial research question for the academic fields of Economic Geography and International Business studies. Indeed, both fields are nested within the larger disciplines – respectively in human geography and in strategy and management studies. Both fields are primarily concerned with descriptions and explanations of real-world economic phenomena in the world. There is thus much commonality between Economic Geography and International Business studies.
In this chapter, I focus on two key issues that speak well to the interface between Economic Geography and International Business studies: (1) the geographical nature of International Business and (2) the theorization of spatiality in International Business studies. The first issue is fairly obvious in a global economy characterized by densely interconnected networks of firms and economies operating at different geographical scales. In short, there are clearly visible geographical foundations to International Business activities (Yeung, 2005a, 2009a). While the role of physical location and distance has been conceptualized in some leading theoretical perspectives in International Business studies (e.g. Dunning, 1998, 2009; Buckley & Ghauri, 2004), the nature of spatiality entails much more than location as a production factor, an agglomeration economy, or a competitive advantage. The next section offers a critical overview of these conceptions in International Business studies.
Second, geography matters to International Business in diverse ways beyond simply discrete locations as cost variables measured by their distance-decay effects (e.g. Beugelsdijk, McCann & Mudambi, 2010; McCann, 2011). A relational perspective on spatiality in International Business conceives location as only one dimension of the different spatial configurations of cross-border activities. Other critical spatial dimensions include the geographical scales of business organization, the territorial embeddedness of firms and their assets, the local and regional effects of firm activities, and so on. The second section seeks to rethink the importance of spatiality in International Business studies. In the concluding section, I draw together these discussions and examine some key research challenges for the two fields.
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Geographical foundations: the Economic Geography of International Business
In its essence, International Business takes place through firms operating across national borders via different entry modes, such as wholly owned subsidiaries, joint ventures, strategic alliances and so on. These operations include activities along the entire value chain, from resource seeking (e.g. raw materials) to asset exploitation (e.g. R&D) and efficiency gain (e.g. production and distribution). In organizing their complex cross-border activities, these firms – commonly known as transnational corporations (TNCs) or multinational enterprises (MNEs) – develop different management strategies and exercise diverse control mechanisms in order to achieve specific corporate goals and competitive outcomes.
In this broad contour of International Business activities, there are tangible geographical foundations that underpin the competitive success of specific TNCs and the collective importance of economic globalization spearheaded by these movers and shapers of the global economy. At the most basic level, there must be geographical differences in resource endowments, assets, and production factors for cross-border activities to be profitable. Specific resources are only found in some places, but not others, and this uneven geographical distribution of physical resources often constitutes one of the raisons d’être of International Business, particularly in resource-seeking operations. Other forms of uneven geographical distribution of non-physical resources, such as labour and regulations, can also serve as an attractive reason for firms seeking international production for efficiency gains.
But why do firms take the trouble to establish and manage their operations in countries other than their home economies (notwithstanding substantial geographical unevenness even within these home economies)? Existing International Business theories tell us that there are significant transaction costs associated with exploiting the uneven geographical distribution of physical resources and human assets through non-equity forms of contractual arrangements, such as international trade prevalent in the 19th century and international outsourcing in the late 20th century and beyond. Domestic firms therefore seek to internalize these costs by taking direct ownership and control through establishing cross-border operations. In this process, these domestic firms are transformed into transnational corporations that fundamentally underpin the emergence of International Business as a late 20th-century phenomenon, dubbed “global shift” in Peter Dicken’s (1986, 2015) treatise.
This transformation in the corporate arena raises a significant question – what are the geographical foundations of the behaviour and management of such TNCs? To me, at least three geographical dimensions are important considerations – origin, organization and outcome. First, geographical origins of TNCs matter in their global reach and business operations. Prior to their internationalization, domestic firms are often embedded strongly in the business systems of their home countries. These systems are defined in the varieties of capitalism literature as distinct labour relations, financial governance, management practices, state-firm relations and so on (Whitley, 1999; Hall & Soskice, 2001). When they eventually venture abroad to minimize transaction costs and/or seek new assets/efficiencies, these domestic firms carry with them distinctive business recipes and corporate cultures. This distinctive “home origin” has led to fairly divergent International Business practices among global lead firms (e.g. Coe & Lee, 2006, 2013). There is thus no doubt that many US TNCs operate quite differently from Japanese or Chinese TNCs in today’s global economy.
Despite the advent of contemporary globalization, there is still no conclusive evidence that global corporations from different home countries are converging in their organizational behaviour and strategic management. Over two decades ago, Michael Porter (1990, pp. 614, 807 note 1) argued that:
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[t]he more competition becomes global, ironically, the more important the home base becomes . . . Yet my research on this book has made it clear that globalization does not eliminate a powerful role for the home nation. The role of location, particularly of the home base, is far greater than I once supposed.
This national difference in TNC origins constitutes one major geographical foundation in International Business activities. It makes sense theoretically to explain why persistent geographical differences in these corporations, presumably the key drivers of economic globalization that “even out” geographical differences in development, continue to exist.
Second, TNCs from even the same home country and/or sector may organize their cross-border operations in fundamentally different geographical ways. Some TNCs may prefer to concentrate on specific macro-regional economies and organize their operations on the basis of such regions as the Americas, Europe, Asia, Africa and so on, whereas other TNCs may seek global presence in every major macro-region. The former become TNCs with distinct regional presence and specialization, and the latter are known as global corporations. This geographical foundation in TNC organization reflects not just their difference in origins. More importantly, it demonstrates the critical role of market and production geographies in shaping strategy and organization of TNC activities (e.g. Wrigley, Coe & Currah, 2005; Wrigley & Lowe, 2007).
The nature of value chains also constrains this spatial organization of TNCs. In value chains characterized by spatially dispersed factors of production (e.g. mining and agro-food), TNCs tend to be more “regional-centric”. The same regionalized pattern of TNC organization also occurs in industries dominated by highly specialized industrial clusters (see Enright, 2000; Rugman, 2005; Phelps, 2008). For example, while the electronics industry is fairly global in its market penetration, most leading electronics TNCs engage in vertical specialization to organize their International Business activities. In doing so, their value chain activities are highly concentrated in specific industrial clusters and regions (e.g. Silicon Valley for R&D and China’s Yangtze River Delta for production). In short, TNCs intentionally build competitive advantages through different geographical organizations of their markets and production. These diverse organizational geographies of markets and production constitute the essential foundation of International Business activities (see also Jones, 2005, 2008; Faulconbridge, 2008).
Third, the cross-border activities of TNCs have undoubtedly led to much greater geographical interdependency and heterogeneous outcomes throughout the global economy. Ironically, these outcomes are not exclusively limited to the home and host countries of these TNCs. In fact, the advent of International Business activities has exacerbated the already existing uneven geographical development in the world. Through their spatially selective investments and operations, TNCs can make or break specific localities and regional economies that are over-dependent on a small number of such TNCs (Phelps & Fuller, 2000; Dawley, 2007, 2011). Other potential host localities not benefitting from TNC presence may lose out in terms of employment growth, new firm formation, local capability development and so on. The divestment and restructuring of TNC activities can also impact very significantly on their home countries. Taken together, uneven geographical outcomes of TNC activities at different spatial scales – from local and regional to national and macro-regional – have posed a fundamental challenge to the sustainable success of International Business and, more broadly, economic globalization as a new phenomenon since the late 20th century.
While the above geographical foundations underpin the Economic Geography of International Business, spatiality and the spatial relations of these origins, organization and outcomes remain largely under-theorized in mainstream studies of International Business. This is a reflection of the predominantly Anglo-American origins of management and organization theories. In their critical reflections on the field of organization theory, Ghoshal and Westney (1993, pp. 6, 11) observed that:
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[s]tudies focusing on organizations and environments in Europe or South-East Asia have been labelled “area studies”, whereas research on organizations in California or Ohio has led to propositions that have been implicitly stated and accepted as universal . . . Organization theorists have ignored or underemphasized the case of diversified organizations whose various constituent units are located in different business or geographic contexts.
For decades, management and organization theorists have conceived organizations as ontological entities separate from two key dimensions of great social significance – time and space. As geographer Bob Sack (1980, p. 4) noted: “space is an essential framework of all modes of thought. From physics to aesthetics, from myth and magic to common everyday life, space, in conjunction with time, provides a fundamental ordering system interlacing every facet of thought”. In short, space serves as a foundational organizing framework for virtually all dimensions of International Business. While time, as expressed in studies of organizational change and learning, has received some attention in management and organization theories, space remains largely outside the normal orbit of theory-development routines in management and organization studies.
Indeed, geographical dimensions – distance, location, space, territoriality, geographical scales and spatial relations – may exert such significant causal influences on the organization and behaviour of TNCs that they may fundamentally challenge our existing conceptions of the strategy, control and management, performance and impact of these corporations in society and communities. As the late John Dunning (1998, p. 46) reflected in relation to International Business studies: “the emphasis on the firm-specific determinants of international economic activity, while still driving much academic research by scholars in business schools, is now being complemented by a renewed interest in the spatial aspects of FDI [foreign direct investment]”. In a reflection published a decade later, he further noted that:
[w]hen asked to contribute to a JIBS symposium on the Multinational Enterprise and Economic Analysis in 1998, I chose as my subject “Location and the multinational enterprise: A neglected factor?” (Dunning, 1998). This was because, at the time, I did not consider mainstream IB theory had fully appreciated how the L component of the OLI [Ownership, Location, and Internalization] paradigm was influencing the extent, industrial and geographical pattern, and modality of MNE activity.
(Dunning, 2009, p. 23)
Most recently, Peter Buckley (2016) noted in his reflection on the internalization theory in International Business studies that location theory remains a significant “unanswered question” that poses a challenge to the theory’s analytical efficacy.
To a certain extent, this interest in the spatial aspects of international investments is related to the much wider geographical reach of TNCs in more recent decades. The late Raymond Vernon (1992, viii) observed sometime ago that “the enterprises of the 1990s routinely span distances with an ease that could not have been contemplated two or three decades ago, searching for opportunities and threats in distant places”. This global reach of TNCs, however, has not diminished the role of geography as an important variable in analysing their ever-expanding tendencies. Instead, spatial differentiation inherent in today’s global economy presents a significant challenge to the management, organization and success of all transnational corporations (see Dicken, 2015).
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Despite the above critical observations, recent theoretical work in the “new Economic Geography” (NEG) (Combes, Mayer & Thisse, 2008; Iammarino & McCann, 2013), the geography of international production (Dunning, 2009; Beugelsdijk & Mudambi, 2013; Buckley & Strange, 2015), and the analysis of international strategy (Porter, 2000; Hitt, Li & Xu, 2016) has explicitly incorporated location in their analytical frameworks. Econometric studies in NEG have shown that geographical agglomeration produces external economies that lead to increasing returns to scale under conditions of imperfect competition and multiple equilibria. In their major review of the economics of agglomeration, Fujita and Thisse (1996, p. 347) footnoted that “the study of location problems in the international marketplace is still in [its] infancy and constitutes a very promising line of research”. In the analysis of competitive strategy, location has been given theoretical prominence through the analytical coupling of the tight relationship between clusters and competitive strategy at the firm level. In this sense, Porter (2000, p. 272) argued that “geography and location must become one of the core disciplines in management. There is a compelling need to reorient our thinking about corporate strategy in a way that sees location and cluster participation as integral to a firm’s success”. Finally, location has also been incorporated into John Dunning’s revised eclectic framework of international production (Dunning & Lundan, 2008). Spatial transaction costs are theorized to influence the raison d’être of transnational corporations.
These interrelated strands of theorization of the Economic Geography of International Business, nevertheless, remain partial and static in their consideration of the geographical foundations of International Business (see also Yeung, 2009b). First, space and location are incorporated into these theoretical frameworks as the backdrop or scaffolding on which economic and organizational processes operate. Although distance (both physical and cultural) and location are conceptualized as exerting some “friction” and influence, firms and organizations continue to be viewed as ontologically independent entities that operate according to some preordained and internalized economic logics and strategies. Even when “geography” is explicitly mentioned, it is conceived as a descriptor to put into context the location of TNC activities. As described by Dunning and Lundan (2008, p. 81) in Multinational Enterprises and the Global Economy:
[t]he nature of FDI undertaken by MNEs is extremely varied. Because of this, both the motives for and the determinants of international production will differ. The parameters influencing a Finnish pulp and paper company investing in a mill in Indonesia are unlikely to be the same as those influencing the purchase of a French food processing company by a Canadian MNE. Similarly, those determining the pattern of rationalised production in the EU by a large and geographically diversified US motor vehicle MNE will be quite different from an investment by a Korean construction management company in Saudi Arabia, a Chinese state-owned oil company seeking new reserves in the [sic] Sudan, or a UK bank [opening] a call centre facility in India.
There is no doubt that the above nuanced understanding of differentiated TNC motives is important, particularly in light of the undifferentiated treatment of the firm as an actor in mainstream economics (see also Yeung, 2005b). Still, there is a missed opportunity to bring this firm-specific differentiation to bear on the dynamic processes of spatial differentiation in International Business activities. To put it more bluntly, why do TNC motives matter if we are not yet told their connections with the geographical origin and host regions and/or countries? Are there specific contexts, institutional or otherwise, in these localities and/or nations that compel TNCs to act in particular ways and manners? How might these different geographical contexts interact with TNC behaviour to (re)constitute new opportunities for and/or threats to more spatially even development in these regional and national economies?
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Second, important geographical dimensions, such as spatial scales and relations, are neglected in this more recent work in International Business studies. Geography is therefore essentially stripped down to “location”, which in turn is translated into measurable distance between points in space (e.g. Baaij & Slangen, 2013; Blanc-Brude et al., 2014; Jiang, Holburn & Beamish, 2016). This is evident, for example, in Lomi’s (1995, p. 111; my emphasis) observation that “the recurrence of patterns of organizational concentration in space across different industries and in a number of national contexts provides indirect evidence that location may be a general factor shaping the evolution of organizations”. Even the latest thinking by Dunning (2009, p. 30; emphasis omitted), shortly before his death, continues to perpetuate this misplaced view of “the dynamics of the locational decisions of MNEs, which, to my mind, remains the central core of IB theory and that of the eclectic paradigm”. These Euclidean conceptions of absolute distance and space as a “container” tend to dominate the emerging work on the geography of firms, economic development and international production. But they have neglected the critical importance of other dimensions in the geographical foundations of International Business. As argued critically by Beugelsdijk, McCann and Mudambi (2010, p. 488) in their introduction to a Special Issue of Journal of Economic Geography that aims to bridge Economic Geography and International Business studies:
[n]one of these streams of research explicitly focuses on how the firm’s organizational characteristics relate to the firm’s fundamental geographical characteristics, both within and between countries, because the role of the firm in space is rarely the main object of study (Beugelsdijk, 2007). Notwithstanding the important contributions that NEG and firm heterogeneity studies have made to our understanding of multinational activity, MNEs are still basically portrayed in geographical space as independent units agglomerating in certain locations, leaving the nature of the interaction between places and space as a black box.
Third, the primary focus on the national scale in most work in International Business studies further exacerbates the problem of missing geographies at other geographical scales. This problem of “methodological nationalism” is common when economic processes, institutional structures and cultural practices are assumed to be homogenous and stable within national territories (e.g. Ma, Delios & Lau, 2013; Beugelsdijk et al., 2014). International Business studies remain firmly locked into the quest for understanding the location choice of TNCs at the national scale and the macro-economic dimensions of the changing international allocation of economic activity. This form of methodological nationalism not only leads to a fixed and uncritical notion of the national scale as the primary and natural unit of investigating into TNC activities, but also underestimates seriously the substantial heterogeneity of localities and regions within specific countries. Put simply, localities and regions differ significantly even within the same country; TNC activities at these spatial scales are also necessarily different. This spatially differentiated pattern of TNC activities and FDI behaviour poses one of the most significant lacunae in the existing research in International Business studies.
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Rethinking spatiality in International Business studies: a relational economic-geographical perspective
Taking an economic-geographical perspective means rethinking spatiality in International Business studies. This section aims to draw upon the above conceptual work and the significantly larger body of theoretical literature in the discipline of Economic Geography to reassert the importance of space and geography in International Business studies. As argued by Schoenberger (2000, p. 329):
Spatial form, however, is not merely a by-product of decisions taken according to the more compelling specifics of products, markets, and production processes. Firms produce and use and are shaped by spatial relations as a normal part of doing business and must continually create and seek to validate spatio-temporal processes and understandings as a condition of staying alive. Another way of saying this might be that spatial and temporal processes are very deeply part of the production function and the growth trajectory, not artifacts of them.
In attempting to answer the opening questions of this chapter, I argue for a relational framework for examining the geographical foundations of TNCs and for a new direction of research in International Business studies. Instead of taking space and location as the backdrop of organizational behaviour and change, we can theorize the complex relations and interactions between business firms and geography within the realm of organizational space. The conception of organizational space as relational is explained by the ways in which its geometry varies with specific relations constituted by different organizational units. Organizational space thus differs significantly from physical space in which location and distance can be directly observed and measured. Organizational space is also different from the concept of organizational fields in institutional theories that defines the structural or population characteristics of organizations as “the totality of relevant actors” (DiMaggio & Powell, 1983, p. 148; see also Fligstein & McAdam, 2012).
This theorization can potentially contribute to a relational perspective for understanding why and how business firms are fundamentally spatialized in their origin, organization, performance and impact (Yeung, 2005c, 2008). This relational approach aims to contribute to the development of more sophisticated theories in International Business studies that may not be directly operationalizable and measurable in quantitative terms. As Rousseau and Fried (2001, p. 3) cautioned, “the common demands for clean (read: simple) models do not always fit with the messy reality of contemporary work and organizational life”. More specifically, my strategy of tackling these theoretical questions is to focus explicitly on one particular type of business organization – TNCs and their International Business activities. This specific choice reflects the greater likelihood of geography having a significant influence on the organization and behaviour of TNCs that operate across national boundaries in an integrated manner. For example, Frost (2001, p. 121) concluded that “the multinational firm may offer an ideal context for advancing our understanding of the firm-location nexus precisely because of the ability to study a single corporate entity in multiple institutional contexts”.
To construct this relational perspective and to clear away “conventional notions to make room for artful and exciting insights” (DiMaggio, 1995, p. 391), an economic-geographical approach can offer several key insights to the field of International Business studies. First, we can conceive spatial differentiation and configurations as both cause and outcome of International Business activities. Geographical foundations serve as one of the major imperatives in explaining the competitive dynamics of TNCs and their cross-border activities. Second, uniting the two fields of Economic Geography and International Business studies means taking seriously both spatial structures and (international) business agency. The former are both inputs and outcomes of the strategic imperatives of the latter. It is through TNC activities that we can appreciate the critical role of geographical foundations. But these very activities further (re)produce and/or disrupt those geographical foundations to create conditions for future business reorganization and spatial restructuring. Third, linking home and host locations and impacts in transnational operations points to the analytical necessity of considering these issues at multiple spatial scales, such as local, regional, national and macro-regional scales. Taken together, these analytical insights help us go beyond the theorization of firm-specific drivers of International Business activities and put TNCs in their geographical contexts.
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In the remainder of this chapter, I construct such a relational perspective on transnational activities by global firms. Here, spaces of TNCs can be defined as differentiated spatial configurations or areas constituted by ongoing relations and transactions controlled and coordinated by lead firms. The difference that space makes is in the co-evolution of International Business activity with these configurations. As a relational phenomenon subject to interactive effects among different firms and non-firm institutions, transnational activities reflect not only firm-specific locational decisions and the distance-effects of physical space. More importantly, these activities are driven by the organizational capabilities and global reach of TNCs and their competitors, customers and partners. Organizational decisions reflect these interactive relations among key actors in International Business, rather than abstract spatial variables such as physical or cultural distances.
When we take into account such constellations of intra-firm (parent-subsidiary), inter-firm (customer-supplier) and extra-firm (non-economic actors) relations, International Business activities can be better described and analysed as differentiated spatial configurations of global production networks (GPNs). These networks comprise both globalized and decentralized structures. The more globalized structures are often controlled and coordinated by TNCs as global lead firms (see Coe et al., 2004; Coe & Yeung, 2015; Yeung & Coe, 2015; Coe’s Chapter 9 in this volume). These lead firms can exercise strong market or product definition and thus create and capture more value from such globalized structures of production and consumption. Some recent studies in International Business have considered how these geographical structures are determined by global lead firms or flagship firms (e.g. Buckley, 2011; Buckley & Strange, 2015; Buckley & Prashantham, 2016).
Not all GPNs, however, are highly globalized and centralized. Some networks are characterized by decentralized structures of multiple actors at various spatial scales. This phenomenon is particularly prevalent in new high-tech industries in which dominant lead firms are yet to emerge (e.g. 3D printing and artificial intelligence). In these decentralized networks, the role of large TNCs as global lead firms is less prominent and significant. Instead, localized and innovative firms embedded in strong social and institutional settings are likely to drive these networks. In such “webs without spiders”, localities provide very critical geographical foundations to the emergence and evolution of multiple innovative firms. These localities are not simply “dots” on maps that are picked by global lead firms in their search for market domination. Analysing these decentralized structures requires us to go beyond the location-as-dots approach in strategic management and International Business studies (see also Faulconbridge, 2008; Jones, 2008, 2010).
Put together, TNC networks serve as a geographical constellation of unique configurations of GPNs. This approach extends beyond the aspatial strategy-structure-performance approach in most International Business studies of intra/inter-firm networks. As international production is becoming increasingly more prevalent in the global economy, TNC activities are organized on the basis of networks rather than arm’s length transactions. Through such a heterarchical form of economic organization, the organizational boundary of each TNC continues to expand, and more firms and other institutions are enrolled into TNC networks (Ghoshal & Bartlett, 1990; Yeung, 2005b, 2008; Gulati, 2007; Levy, 2008).
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In particular, the relational interaction between localities/places and TNCs in GPNs is determined by the mechanisms of strategic coupling, a process of multiple actors taking advantage of their mutual complementaries in networks. In Dicken’s (2000) work, TNCs are seen as having their unique places because of their geographical embeddedness in regions of origin. But the same TNCs are also creating new “places” through their cross-border investment processes. As such, TNCs capitalize on existing local and regional assets and yet produce new “places” of assets. Strategic coupling serves as a set of dynamic mechanisms through which TNCs coordinate, mediate and arbitrage strategic interests between local actors and their counterparts in the global economy. To Dunning and Lundan (2008, p. 490):
Such systems enable firms to structure and locate each part of their value chains more closely in line with the existing comparative resource and institution advantages of countries (e.g., in Asia and Latin America), while also allowing for the dynamic reconfiguration of these assets, depending on the role assigned to the affiliates, and their degree of integration with local firms.
This co-evolutionary place-TNC relation also leads to substantial spillover effects created by TNC activities. Buckley and Ghauri (2004, p. 91) thus argued that:
The links between Economic Geography and development are also worthy of attention in the literature on “spillovers” from MNEs to the local economy. Many of these spillovers are enhanced by geographical proximity (in the formation of clusters of supporting industries, for instance) and this factor is not often explicitly included in the examination of spillovers.
In my earlier empirical work on East Asian economies (e.g. Yeung, 2009c, 2014, 2016), I have demonstrated that transnational corporations embody both local and non-local links in their emergence and evolution over time. Among East Asian TNCs, their organizational capabilities and global reach are crucially determined by the three mechanisms of strategic coupling with global lead firms based in North America, Western Europe and Japan: strategic partnership, industrial market specialization and (re)positioning as lead firms. These mechanisms of strategic coupling help draw different East Asian localities and regional economies into the diverse territorial configurations of GPNs in different industries, such as electronics, shipbuilding, semiconductors and automobiles. Mediated by TNC activities, this enrolment process of strategic coupling and its constitutive mechanisms inadvertently involve the localities and regions in which these other firms and institutions are embedded. As such, the globalization of TNC networks represents a powerful impetus to produce different kinds of economic specialization in these localities and regions (see also Yang, 2009; MacKinnon, 2012; Wei & Liao, 2013; Horner, 2014).
Conclusion: challenges for International Business studies and Economic Geography
This chapter has examined the critical link between localities/regions and the global economy through examining key economic actors – business firms and their transnational production networks. My arguments for closer intellectual interaction between Economic Geography and International Business studies points to the usefulness of making global connections through transdisciplinarity and the analytical relevance of understanding flows and relations across space. This geographical approach goes beyond agency-centric views common in International Business studies and moves towards a GPN of International Business studies through the engagement, connectivity and transformation of knowledge in the Economic Geography of International Business activities.
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The implications of this approach for the analysis of the geography of International Business are manifold and complex. There are at least two explicit implications that should be laid out briefly here. First, instead of asking whether TNCs have a global strategy to compete for the future, International Business researchers can ask whether these global lead firms have a spatial strategy. Mundane as it might sound, this question can be fundamentally important to corporate performance and success because today’s economic competition is not necessarily pitched at the global scale only. As discussed extensively in this chapter, corporate competition indeed operates at all spatial scales, and corporate success can only be secured through an understanding of these overlapping scales of competitive fields. By privileging the global scale, the competitive strategy literature in International Business studies might have misled us by placing too much emphasis on the centralization and implementation of corporate decisions on a global scale. This relentless pursuit of a global strategy is often championed at the expense of reaping potential geographical economies through more appropriate scalar (re)configurations and representations of organizational units in this “global” competition.
Second, International Business researchers can take stock of how geography is conceived by actors in business organizations – the idea of cognitive representations of space. Understanding and resolving the contradictions and tensions in these cognitive mindsets within an organization, such as a global lead firm, will help corporate managers to open better channels of communications within the organization and to strengthen intra-organizational cooperation and solidarity. For example, will it be effective for marketing executives in the parent company to champion a global branding approach if the R&D team takes a highly local orientation in their design of specific products? Alternatively, will a global corporation be efficient if its central purchasing department practises global sourcing and yet managers of its foreign manufacturing plants are so locally embedded as to source within the host countries? Ultimately, the success of business organizations depends critically on their willingness and ability to recognize complexity and differentiation in the global space-economy. Economic geographers and International Business researchers who are cognizant of the role of space and geography will not make this global economy less complex; but they can certainly enable it to be more comprehensible and, eventually, manageable.
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