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34

EPILOGUE

Gary Cook

I write this epilogue towards the end of a long editorial process. It is time to face the obvious question: was it worth it? The structure of the epilogue is to return to the challenges set out in the introduction, both by the editors and by Henry Yeung at the 2012 Academy of International Business UK & Ireland conference. It will end with a short section on “what next?”, which will outline some practical measures to encourage dialogue and joint working, as well as sketching some key research themes and questions.

Establishing the common ground

Both Economic Geography and International Business have been alert in identifying that there has been a profound change taking place over the past 30 years or so, and which is still continuing, in the nature of firm strategies and the structure of the global economic system. That change is characterised by the radical vertical disintegration and geographical dispersion of production, part of which has gone alongside more extensive reliance on third parties. Several chapters in this volume, some contributed from geographers, some from International Business scholars, probe this phenomenon, particularly the chapters by Coe, Strange and Magnani, Glaister, and Sinkovics et al. As argued by Coe, there are some distinctive contributions which Economic Geographers have made to the study of this phenomenon, such as the more careful analysis of how power relations constitute the value chains/production networks and how the particular institutional context of the “hub” multinational orchestrating a chain or network influences the particular form of that network. They have also given more attention to the political economy of the international and national regulatory regimes which both constrain and enable firm strategies, as do the activities of various stakeholder groups such as trade unions and consumer groups. As ever, Geographers have a greater interest in the implications of such networks for processes of uneven development, International Business scholars in how they can enhance and sustain the competitive advantage of firms, although Geographers acknowledge that those regions which attract such activity must be able to offer strategic advantages to firms. Moreover, as Coe shows, current developments in the theory of global production networks conceptualise them as lead-firm-based configurations, rather than as stylised industry patterns. They are also placing greater emphasis on the multiple strategies firms pursue to place themselves as best they can within a complex and pressured economic environment. These developments clearly bring the two disciplines closer together. Glaister reveals the magnitude and diversity of the literature on alliances in International Business, which incorporates insights from a range of disciplinary fields. As he argues, greater understanding of this corpus of work will enhance the analysis of relations and networks within Economic Geography. Likewise, Strange and Magnani show how the literature on the “global factory” in International Business can complement the literature on global production networks.

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Economic Geography and International Business share a common interest in the sub-national region as a crucial arena in which economic activity takes place. As Fuller clearly shows in his chapter, the two perspectives do have some fundamental differences, perhaps the critical one being that geographers do not associate regions with administrative boundaries, but with the operation of a particular set of institutional processes. It is also true that International Business has developed its interest in the sub-national scale much later than Economic Geography. Both disciplines have a common interest in agglomeration and recognise the same fundamental sources: Marshallian economies based on within-industry effects; Jacobs externalities based on cross-industry effects, scale, competition and external connectivity. Strangely, International Business gives less attention to Jacobs’ externalities, peculiar given their international dimension and the emphasis on the process of competition. The nature and extent of a region’s extra-regional connections are integral to how geographers conceive of regions and the economic processes that take place within them. Geographers are also more interested in connections between regions than is the case in International Business. Economic Geographers and International Business scholars both recognise that the degree of embeddedness of the firm within a region is a fundamental influence on the ability of the firm to build competitive advantage based on the tangible and intangible assets within that region. Again, it is fair to say that geographers have been more careful in their conceptualisation of embeddedness than International Business. Both disciplines have a strong interest in what drives the location choices of MNEs, what drives the particular arrangements firms make in each location (e.g. what activities to site there, what supplier linkages to make) and the impact inward investment has on the host region. As Fuller points out, Economic Geographers are more alert to the fact particular “clusters” are far from being homogeneous and that the particular nature of the cluster will condition what it is possible to achieve by locating there. There is also a tension between the emphasis on knowledge spillovers and the palpable fact that firms typically strive to keep core knowledge proprietary.

In Chapter 7 Barnes and Sheppard identify core research areas within Economic Geography, which have had influence outside the discipline, specifically industrial districts, spatial labour markets, innovation milieus, global production networks and commodity chains. These are all clearly within the domain of International Business, as is the broader agenda of Economic Geography identified by Barnes and Sheppard, examining the places and spaces in which economic activities are carried out and circulate. Industrial districts (or, to use another shorthand, clusters) feature prominently in many of the chapters in this Companion contributed by International Business scholars, such as the chapters by Gugler, Cook and Pandit, and Goerzen et al. Likewise, global production networks and commodity chains, commented on at greater length by Coe and Yeung, which feature in the contributions from Strange and Magnani and Sinkovics et al., although the latter add a sobering note of qualification regarding the extent to which ideas from Economic Geography have penetrated into the International Business mainstream. There is a very active literature in International Business and in Economic Geography examining the linkages between location and innovation, highlighted in the chapter by Castellani. There is common interest in the rapid economic development of emerging economies and their implications for both established and emerging economy multinationals.

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Barnes and Sheppard outline some of the key “hot topics” in Economic Geography research, some of which have clear relevance for International Business. Economic Geography is taking a closer interest in how firms make decisions and how this is influenced by spatial factors. This is also a priority area for International Business. Likewise, how markets form is a fundamental question, as is the relationship between cultural factors and firm strategies in shaping consumer preferences. The area of the interplay between labour markets and the changing geography of production, powerfully influenced by MNE strategies, is a relatively neglected area within International Business. Both disciplines have developed a keen interest in how economic activity is regulated, at international, national and local levels, and how this affects the economic dynamism of particular places. Geographers have placed more attention on services, and above all the internationalisation of the financial services industry and how this interacts with the changing internationalisation of other forms of economic activity.

Both Economic Geography and International Business have an intense interest in knowledge flows and their link with innovation and the strategic creation of competitive advantage by firms. The chapters by Cooke (Economic Geography) and Wu and Yang (International Business) focus in particular on this issue. Cooke notes that early writing on learning in the business literature (not specifically International Business) was framed by evolutionary thinking, a paradigm which has recently gained significant traction in Economic Geography, as the chapter by Rigby details. Again, as Cooke notes, the literature in Economic Geography has placed less emphasis on corporate or organisational learning compared to the business and management fields. Economic Geographers have been more interested in learning within regions, which speaks more closely to their interest in regional development and regimes of uneven development. The chapter by Castellani is significant in this regard, as he shows how MNEs are key actors linking regions in innovation and that, despite strong persistence in the location of innovation activity, some regions have prospered disproportionately, and this concentration is particularly marked where MNEs are involved in collaborative innovation.

The melding of powerful complementary, but incomplete, perspectives on International Business, the phenomenon

An initial observation is in order at the start of this section. It is telling that there is far more reflection in the contributions to this Companion by Economic Geographers regarding how their discipline can strengthen International Business than the other way around. One can speculate as to the reasons for this. It may be that, on the whole, geographers are better informed about the other field than in the converse case. I have no real evidence on the extent to which that is true. There is more evidence that geographers do see it as odd that an inherently spatial field like International Business has not thought more deeply about the conceptualisation of space.

One of the key areas, possibly the most important area, where Economic Geography can complement International Business is in terms of the conceptualisation of space, which is more sophisticated in Economic Geography, despite the fact that International Business is inherently a spatial concept. In terms of a richer conceptualisation of space, Yeung makes a distinction between physical space, which can be measured in terms of the physical location of an MNEs operations, and organisational space, which is fundamentally relational in character. Clearly there will be internal relationships between the various parts of the MNE. It is also clear that in each location where the MNE operates, there will be influences at a range of spatial scales on the institutional and economic context in which the subsidiary or HQ operates. These relationships and contexts also change over time, partly as a direct result of the actions the MNE takes, and those actions in turn are influenced by both the particular contexts in which individual units operate and by the totality of the MNEs’ international scope. The interaction between the MNEs’ strategy and actions and network relationships in which they are situated is influenced by what Yeung terms strategic coupling, which he defines in this Companion as “a process of multiple actors taking advantage of their mutual complementarities in networks”.

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Despite the “obvious” connections which appear between the two disciplines, given their common interest in the same phenomenon, the connections between the literatures in the two disciplines in this area have been quite small to date, as noted by both Coe, from the geography perspective, and Sinkovics et al. from the International Business perspective. Coe argues International Business will be enriched by making networks the unit of analysis, rather than the firm, and by considering in greater depth how networks are governed and how knowledge flows within networks. What International Business can contribute is powerful insights into the creation and enhancement of superior resources and capabilities and theoretical analysis and evidence relating to the make-or-buy (internalisation) decisions which are central to whether, and under what circumstances, the firm will outsource or not. Gammelgaard and McDonald suggest that failing to appreciate the increasing importance of location as a means to enhance competitive advantage is a weakness in the treatment of firm networks in Economic Geography, which can be addressed by drawing on International Business. They also argue that International Business casts light on the importance of spatial transaction costs and the dangers of spreading operations over too wide a span of countries. International Business also has much to contribute to Economic Geography in terms of the analysis of the internal governance of multinational firms and the types of governance structures they set up to manage alliance relationships of various sorts. The chapter by Glaister gives an excellent overview of the issues involved in establishing and managing alliances. Those by Nguyen and Verbeke and Yuan probe the internal governance issues within multinationals. Other points of common interest concern how learning is structured within networks and how firms strategise to capture value.

Wrigley and Wood in Chapter 28 acknowledge the importance (but note some limitations) of some fundamental frameworks in International Business that may be of service to geographers, namely Dunning’s eclectic OLI framework, Bartlett and Ghoshal’s Integration-Responsiveness framework and the Uppsala “stages” model of internationalisation. These frameworks have been the subject of critical debate within International Business, but they have also, to varying degrees, stood the test of time. Others should be added to the list. Internalisation theory brings powerful insights into the make-or-buy decision, which is fundamental in any explanation of the organisation of industry, as famously argued by Coase (1972), albeit in a somewhat constrained sense of the division of economic coordination between firm and market. The Resource-Based View (RBV) has also become central in probing the ways in which firms establish and maintain competitive advantage, duly acknowledged by Wrigley and Wood with reference to Rugman and Verbeke’s Country Specific Advantage and Subsidiary Specific Advantage framework. The RBV has important relatives in the Knowledge-Based View and the dynamic capabilities framework. The International New Venture framework of Oviatt and McDougall (1994) is an important qualifier to the Uppsala stages model. One might note the increasing importance of the Institutional View (Peng & Khoury, 2009); however, this is less relevant to this epilogue, given that Economic Geography is thoroughly imbued with the institutional perspective and, indeed, has much to teach International Business about its application to both theorisation and applied work. The chapter by Bagchi-Sen and Schunder provides an important analysis of the extent to which a broad range of frameworks from IB can be of service in geographically based analyses of the internationalisation strategies of advanced producer services. At the same time, they sound notes of caution about the extent to which they can be applied in services in the same way they do to manufacturing firms. Likewise, Bryson, who also highlights the relationship between advanced producer services and manufacture in his chapter, makes a strong case for the need for genuinely inter-disciplinary work, rather than attempting to construct one “grand theory” of International Business (the phenomenon).

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The stronger emphasis on cities and the relationship between cities within Economic Geography has been shown to be important in several chapters in this volume, notably those by Cook and Pandit, Derudder et al. and Beaverstock and Harvey. Geographers have a much stronger grip on what it is that makes a city more or less central in the global economic system, as demonstrated in the chapter by Derudder et al. The chapter by Holden and Horn is particularly interesting as it traces the importance of cities and relationships between cities to International Business back to the Early Modern era in Europe. It is not a new phenomenon. The chapter also makes a contribution to undermining the “geography is dead” thesis, by showing the central role of cities, and the International Business facilitated and coordinated through them, in shaping which languages were used in International Business and how they were used. The world has not become flat, just because English is used as the most common International Business language. This has an important connection with the insights which Economic Geography provides on the importance of the relationship between places, exemplified in the relational perspective, clearly articulated in the chapter by Murphy. The International Business community is catching on to the importance of cities and this is evident in the chapters by Cook and Pandit, Castellani, and Goerzen et al. By the same token, Geographers recognise the importance of the agency of firms and of firm strategies in constructing the nature of cities and the relationship between them. A revealing spotlight is placed on this issue in the chapter by O’Neill, which looks at the importance of infrastructure investment in underpinning both the economic dynamism of cities and also a high level, and fair distribution, of amenity to citizens. This issue is thrown into sharp relief in the present age, where the private sector is assuming more responsibility for planning and funding infrastructure development in cities. This poses important challenges in terms of the balance between economic efficiency and fairness.

Economic Geographers have much to learn from International Business scholars about the intricacies of strategy and strategic competition, as well as the thorny issues posed regarding the relationship between HQs and subsidiaries and among subsidiaries within corporate networks, as shown in the chapters by Gammelgaard and McDonald, Nguyen, Verbeke and Yuan, and Strange and Magnani. One could broaden the scope by referring to frameworks from Economics, of which International Business scholars are more fully aware, such as Transaction Cost Economics, the economic analysis of property rights, the economics of internal organisation and principal-agent theory. These provide important insights into the links between strategy and the internal structure of the firm and also to the types of contractual and non-contractual governance which firms employ, both internally and externally with third parties. There is much still to do and more will be accomplished if there is serious interpenetration between Economic Geography and International Business and more joint working between scholars in these fields.

Economic Geographers have given more prominence to the internationalisation of professional service firms than have International Business scholars and this is evidenced by the chapters by Wrigley and Wood, Howells and Lowe, Bagchi-Sen and Schunder, Clark, and Beaverstock and Harvey. Beaverstock and Harvey’s chapter also underscores the importance of global labour markets in underpinning the strategies and competitive advantage of MNEs, a topic which deserves fuller treatment within International Business. Both topics provide fertile ground for research within International Business.

Economic Geographers have become more interested in the actions of firms as economic agents, as detailed in the chapters by Fuller, Coe, and Yeung. Actor-network theory is now well established as a framework in Economic Geography, which does recognise the agency of firms, yet which comes at it from a different perspective, that of power relations. This is a dimension which is under-explored in International Business, which does recognise market power in the economic sense, and indeed the understanding of market power within International Business can enrich the conceptualisation of power in Economic Geography. Having a much closer affiliation with Industrial Organisation, International Business has benefitted from the vastly more sophisticated theorisation and empirical evidence regarding the creation, maintenance and exercise of market power. The chapter by Verbeke and Yuan gives a compelling framework for analysing subsidiary roles, appealing to the insights of Edith Penrose. They also show how the literature within International Business provides a sophisticated framework for analysing the nature and evolution of subsidiary roles and the circumstances under which these will be strongly related to national institutions and changes in the degree of (triad) regional integration.

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International Business has moved closer to Economic Geography in recognising that there is a complex relationship between subsidiaries, subsidiaries and HQ, and, crucially, between the mandates and strategic assets subsidiaries accumulate and the particular places in which they are sited. The contributions of both Gammelgaard and McDonald, and Fuller highlight the view of the MNE as a differentiated network as exemplifying theorising which has moved the two disciplines closer together. It remains the case that geographers have a richer conceptualisation and empirical literature on the idiosyncrasies of subsidiary location and the types of action subsidiaries take and the capabilities they possess. This is rooted in the relational perspective, which is concerned with how the different places in which an MNE operates are connected, rather than viewing the location decision regarding individual operating units within a firm as being isolated, which International Business is more prone to do, at least implicitly. Both recognise that these things are not static, although temporal aspects tend to be given greater prominence in Economic Geography.

As has featured in many of the chapters in the book, and as articulated with clarity by Murphy in Chapter 10, the relational perspective has become a core assumption for many geographers, although there is clearly debate within the discipline about the status and conceptualisation of rationality. It is important to recognise this assumption, which, as Murphy explains, seeks to bridge the gap between atomistic views of agents, who, in some approaches are seen to operate autonomously with free will and freedom of choice, and strongly structural perspectives, which assert that human cognition and behaviour are determined (or at least strongly influenced) by social processes and social institutions. The full structure-agency debate is well beyond the scope of this volume and also goes well beyond the field of Economic Geography. Nevertheless, the importance of social institutions in conditioning the way people (managers) perceive the world and both enabling and constraining which actions are feasible (and desirable) is central to much of modern thought in Economic Geography. What is more, geographers have a highly developed sense of the ways in which these institutions that shape behaviour are rooted in particular places and the relationships between places. International Business, in as much as it has increasingly espoused the Institutional View, has become more cognisant of the importance of social structures in framing behaviour, not just of firms, but also of customers, labour, and regulators and politicians. The chapter by Peng and Jung is important in this regard, as it places emphasis on the role of institutions in shaping the location choices of MNEs. The chapter by Gugler also argues that the quality of institutions is a fundamental influence on the attractiveness of a location to MNEs. International Business scholars have not come as far, however, in analysing the complex geographies of the processes which give rise to particular institutions in particular places. Murphy points out the influence of Granovetter’s (1985) writing on embeddedness and the importance of recognising that networks of personal relationships can give rise to norms of trust and reciprocity, which mean that either pure market or pure hierarchy (in the Williamsonian sense) may be less efficient than some hybrid governance structure in between the two. This thought resonates with Dunning’s (1995) writing on the transformations being ushered in by what he termed the “era of alliance capitalism”. More generally, the importance of social capital is well recognised by International Business scholars, including those at the “harder” economic and quantitative end of the discipline.

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Murphy explicates some other features of the geographer’s perspective, which do not find such strong counterparts in International Business, which partly reflects the different questions researchers in the two fields are most interested in. Relational geography is very concerned with micro-social processes. Economic agents need to establish a shared understanding of the situation with other agents, in order to act effectively; however, they are able to imagine futures which are different from the present or the past, therefore they can bring about institutional change. This leads to the third leg of the relational approach, which Murphy terms the socio-material base of the economic order. Here the two influential bodies of thought are Giddens’ structuration theory, which emphasises the mutual dependency of agency and structure (agency creates and recreates structure but structure both enables and constrains agency), and actor-network theory. Actor-network theory is poststructuralist and sees the economic order as arising from the messy interplay of economic actors. Although the economic order can be stable for extended periods, it is also seen as shifting and capable of being rapidly changed (one thinks of the tumultuous consequences of the fall of the “iron curtain”).

Murphy goes on to argue that two particular aspects of the relational approach hold a lot of promise for International Business scholars seeking to understand the organisation, management and performance of firms, markets and value chains. The first is to expand on ideas about why physical proximity matters by recognising the importance of relational proximity. This asserts that a “cluster” or region that is isolated may become prone to lock-in and ossification and that linkages to other territories outside the region can enable a flow of fresh ideas, which sustain dynamism. This idea is very close to those of Jane Jacobs, who strongly emphasised the role of external connections in fostering innovation. Relational proximity is needed to foster trust and mutual understanding at a distance, just as these things underpin positive externalities within the region. Multinational firms are powerful agents who can create such relational proximity through their internal and external relationships. Relational proximity is a critical concept in understanding how MNEs are able to operate geographically dispersed operations and act effectively at distance both in their internal working and their interactions with external agents. The second key concept is socio-spatial practice. This is concerned, putting it a little simplistically, with how firms go about their everyday business, which entails how they interpret and make sense of the world within which they act and also take actions in pursuit of their business. A primary question for geographers is to analyse the circumstances in which the actual practice of firms leads to superior performance. Underperformance, of course, can lead to changes in practice.

Understanding the key assumptions each side is making

Barnes and Sheppard provide an excellent guide to the research agenda and research paradigms in Economic Geography, which will give the uninitiated a sound platform on which to build as they immerse themselves in the Economic Geography literature. They also point out some of the distinctive features of Economic Geography, which highlight some key areas where thinking in International Business can be enriched by engagement with that discipline. First, the fact that the geography of economic activities co-evolves with the economy itself. Here the activities of MNEs are very important. Second, that economic processes are strongly influenced by political and cultural processes, an idea which has gained increasing traction within International Business as the Institutional View has become influential. Third, Economic Geographers challenge the notion that free market capitalism is either inevitable or desirable. Fourth, that Economic Geography is very pluralist in both theory and methodology. These last two features provide more of a challenge to International Business scholars, but awareness of them will make them reflect more on the assumptions they are making and, perhaps, remind them that there are alternative perspectives on the phenomena they study. Cook and Pandit caution that there are some fundamental differences in epistemology and theoretical assumptions, which mean it is not straightforward to meld the two disciplines. Put crudely, Economic Geography is at the idiographic end of the spectrum, emphasising difference and uniqueness, whereas International Business has largely been at the nomothetic end of the spectrum, looking for general principles and laws. The contributions of Barnes and Sheppard, and Fuller point out that it is misleading not to recognise that there is significant pluralism in Economic Geography. International Business is also not monolithic, either in methodology or epistemology. Nevertheless, as a crude generalisation, International Business remains much more closely wedded to Popperian falsificationism, whereas Economic Geography is more imbued with critical realism and post structuralism. This makes it difficult for International Business scholars who venture into the Economic Geography literature, as these epistemological frameworks are alien and key terms are not understood. The converse is less true, as Economic Geographers have typically thought about positivism and falsificationism and explicitly rejected them.

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Yeung makes some sharp observations about the fact that the importance of time and space, as part of the fundamental analytical frameworks of geographers, attested to in many other chapters, is not at all central to much work in the business and management area. International Business research is fundamentally concerned with space, yet to the eyes of a geographer the conception of space appears impoverished and simplistic. He does duly acknowledge that International Business scholars have become aware of the extent to which location and geography are relatively poorly understood. International Business has a lot to say about the motives behind particular location decisions, but has much less to say about how the locations it operates in will in turn shape the way it behaves and the strategy it formulates. This coevolution of firms and territories is a key area in which Economic Geography can enrich analysis in International Business. It is naïve to think that strategy is formulated in some ivory tower in corporate HQ in the home country, bereft of any influence of the home country context, and then optimal locations are chosen as if in some maximisation algorithm and then smoothly implemented exactly as envisaged in the master plan. Surely no International Business scholar worthy of the name actually believes such a thing consciously, and there is abundant evidence in the extant International Business literature that they believe something very different. Yet, Yeung has a point that something akin to this is often implicitly assumed and that there is little explicit theorising of the reverse linkages between the places in which a firm operates and the actions it takes and the strategies it formulates.

The chapter by Rigby outlines the nature and progress of evolutionary approaches within Economic Geography. Its impact within the field has been real, but somewhat limited, partly due to the lack of coherence within Evolutionary Economics and evolutionary approaches more generally. Nevertheless, the case is made that evolutionary approaches do have value to add when examining the dynamics of regional development. Evolutionary Economics has had an even more limited impact within International Business, yet it has clearly been identified as having promise for an understanding of the co-evolution of firms and the institutional environments within which they operate (Cantwell, Dunning & Lundan, 2010). Rigby identifies that one aspect of the evolutionary approach is under-researched and that is the formation of self-organising networks. He specifically links this to the issue that there is considerable variation in how “linked-in” firms are within networks in clusters and points out that emerging findings indicate that firms with greater centrality in networks are able to extract greater benefits from cluster location. This seems like a glimpse of the blindingly obvious, but why then is the strongly differentiated ability of firms to benefit from cluster location often absent from discussions regarding the nature and attractiveness of clusters, beyond typically vague remarks about the importance of embeddedness?

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Evidence that the missing elements matter

Bedreaga, Argilés and McCann show in their chapter that geography and processes operating at a variety of spatial scales, from the local to the international, moderate the internationalisation-performance relationship. The proposition that proper adaptation to the host country environment will influence the performance of a subsidiary is not controversial within International Business and their key concepts of “strategic fit” and “embeddedness” are well recognised. Likewise, the idea that embeddedness becomes more problematic as institutional distance, broadly understood, increases, would be broadly accepted. As the authors note, Hymer himself recognised that there would be a hierarchy of overseas investments which mirrored the hierarchy of world cities – see also the chapter by Derudder et al. in this Companion. Embededdness will specifically increase the likelihood that firms benefit from information flows and mutually beneficial cooperation, although the authors note a potential risk of “over-embeddedness” where social relations outweigh economic imperatives. Bedreaga, Argilés and McCann argue that, as far as the study of MNEs is concerned, there has been a focus on embeddedness in both the Economic Geography and International Business literatures, albeit that the former has been more concerned with implications for the host region and the latter with implications for firm performance.

The chapters by Coe, Yeung, and Bedreaga, Argilés and McCann review a considerable body of evidence relating to the nature and importance of global production networks and the institutional and relational processes which underpin them. From the IB side, the chapters by Glaister, Strange and Magnani, and Nguyen survey a vast corpus of empirical evidence in IB that shows the importance of standard economic and strategy frameworks in IB for understanding the nature of the networks and alliances firm form, the constraints on how truly global firms are, and can be, and the important interplay between the scale and scope of firms’ global and (triad) regional strategies and the internal organisation of the firm.

Clark’s contribution on the Culture of Finance (Chapter 32) is very instructive, as it takes first a standard economic framework and then shows how being embedded (or not) in a particular place materially affects the behaviour of economic agents. This exemplifies how important it is to recognise that culture matters, and that culture has a particular geography, which goes beyond standard frameworks in International Business. His emphasis on clear and rigorous theory building to provide a framework for analysis sits well with best practice in International Business. The chapter is also of great contemporary interest as it explicates why the behaviour of individuals can be hard for organisations to control. Howells and Lowe’s chapter melds geographic and business perspectives to explore the origins of innovation in the hotel industry and the various modes of internationalisation which diffuse those innovations internationally. Here the pressure of competition and the social networks of entrepreneurs, including international diasporas, emerge as being highly important.

Wrigley and Wood’s chapter, summarising evidence from empirical studies on retailing, identifies four key contributions made by Economic Geography, which could enrich International Business in important ways. First, a sophisticated view of embeddedness, recognising territorial embeddedness (necessary to achieve legitimacy by conforming to formal and informal institutions relevant to a full range of stakeholders in the host economy); societal embeddedness, which concerns the imprint MNEs bring from their home institutional context; and network embeddedness, which concerns the relationships the MNE constructs both internally and with a wide range of external stakeholders to gain access to markets, resources, information and influence. Establishing and maintaining embeddedness is a process which plays out over time and across different spatial scales, from the very local to the international. Second, recognising the influence of regulatory constraints and the informal institutional context. Third, highlighting the fundamental importance of relationships with financial markets and suppliers of financial services (which one might extend to include other providers of professional services, as other chapters in the Companion highlight). This relates to a broader concern in Economic Geography with the process of “financialisation” whereby capital markets and financial intermediaries exercise increasing influence over economic agents and the functioning of the economic system. Fourth, analysis of the selective transfer of knowledge, capabilities and culture from the home context to the host context. Retail is particularly instructive in this regard, given the number of high profile instances of retailers making expensive failed forays into overseas markets, despite their considerable strength in their home market, in some cases making elementary mistakes regarding what is acceptable to the consumer in the target market.

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The place for critical perspectives in International Business research

The issue of critical perspectives poses some challenges for Economic Geographers working with International Business scholars. Whilst International Business is not overtly managerialist – much of the research in the field is “positive” in the sense that it seeks to understand what is there, rather than to further the agenda of corporations at the expense of its internal or external stakeholders – critical perspectives do not constitute part of the core research programme. This creates a sharp problem of incentives, since the top-ranked International Business journals do not include critical perspectives within their aims and scope. Such work is not “off limits”, rather there is no particular interest in it, with the obvious exception of the recently founded journal Critical Perspectives in International Business. There are some avenues open, however, within the top tier journals. Issues regarding governance, corporate social responsibility and sustainability are within scope. There is also interest in the link between the scale and scope of MNE operations and the economic development of the regions in which they are situated, and this interest is long standing. Moreover, the interest of International Business scholars in where MNEs will choose to locate, the scale of their commitment and the scope of the mandate given to particular subsidiaries in particular places is germane to the central issue of uneven development for Economic Geographers, stated clearly in the chapter by Yeung. Yeung highlights the particular issue of “bypassed places”, to coin a telling phrase from Jane Jacobs, regions and countries which do not attract much inward direct investment. Here there is a clear research agenda which would be of interest to International Business scholars regarding policy options for national or regional governments which might encourage more inward direct investment, and their accumulated expertise regarding the influences on the location choices of MNEs will be of good service. Indeed, in a much quoted paper, Buckley and Ghauri (2004) explicitly call for this link between MNE activity and economic development to be the subject of more research. Nevertheless, there is little evidence that critical perspectives will become central to the mainstream in International Business.

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Summary

What lessons do the contributions in this Companion make to the challenges laid down by Henry Yeung at the Academy of International Business UK & Ireland 2012 conference?

The literatures in Economic Geography on global production networks, the internationalisation of professional service firms and on the hierarchy of world cities and relationships between them speak powerfully to this theme. Of these literatures, that on global production networks has had the most impact on thinking in International Business. As this Companion has shown, there is a lot further to go. Within International Business, the literature on the global factory also speaks to this theme, and here there is real scope for fruitful interchange between the two disciplines. International Business is beginning to become alert to the importance of cities, picking up threads Hymer laid down over 40 years ago. There is a literature concerned with service industries and service firms in International Business, and here again there is scope for fruitful interchange.

This issue is perhaps the crux of how and why joint work between Economic Geography and International Business is important to progress. To summarise crudely, Economic Geography provides powerful insights into relations across space and to the institutional influence on the behaviour of economic actors; International Business speaks powerfully to the agency of firms and has much to say about the strategies firms employ to create, sustain and exploit competitive advantage. As noted several times, the penetration of the Institutional View into the mainstream of International Business and the growing interest in Economic Geography to take firms seriously as economic actors give grounds for optimism.

This is already happening. There is joint work going on between geographers and International Business scholars. The composition of the editorial team for this Companion, and their shared history of joint working, is living proof, and but is the tip of the iceberg. Many of the chapters in this Companion exemplify the insights gained by the interpenetration of the two disciplines, and many papers are cited which have bridged the gap. The success of the fairly recently founded Journal of Economic Geography also bears witness. The interest in the special sessions on the boundaries between Economic Geography and International Business at the 2012 and 2014 Academy of International Business UK & Ireland Conferences also give tangible proof of the receptivity of scholars in both disciplines. These things are, perhaps, little more than a beginning, but a promising beginning.

What next?

As noted in the introduction, the editors of this volume were motivated to embark on the project by their lived experience that dialogue and inter-disciplinary work between Economic Geography and International Business are both intellectually stimulating and help to get a more complete grasp on the phenomena being studied. It is clear that this belief is shared by many of the contributors to this volume and in the work cited which has, to one degree or another, explored the interface between these two academic fields. We hope that this Companion will both stimulate others to put their toe in the water and make it easier for them to immerse themselves more fully. Wrigley and Wood, in the conclusion to Chapter 28, welcome the opening of dialogue but insist there must be a serious conversation. This Companion is one small contribution, among many others, seeking to open up that conversation, based on mutual respect, mature constructive criticism, rigorous debate and a spirit of open-mindedness.

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As Fuller argues, the primary need for dialogue is to meld the insights of International Business into the internal dynamics and organisational attributes of MNEs with the insights of Economic Geographers into the dynamics and attributes of regions. Here proper account needs to be taken that the particular attributes of regions are socially constructed and can only be understood by recognising the geographical relations that give rise to them. This will require a reassessment of the extent to which locational advantages within particular clusters can be thought of as depending on local processes, and researchers will need to be more cognisant of the fact that “local” cluster advantages depend on relationships with other places. More research is needed into the relationship between embeddeness and firm performance and the relationship with regional development. As Bedreaga, Argilés and McCann argue, this will need to be more precise regarding the exact definition of embeddedness, which is a multidimensional concept ranging from the scale, depth and strength of linkages a subsidiary forms with local business networks, to the broader embedding of a foreign affiliate in the social and cultural fabric of the host economy. As Fuller points out in his chapter, we know comparatively little about how institutional change occurs as regions become recipients of inward direct investment and as they develop new and/or deeper connections with other regions. Peng and Jung, in their chapter, make the case for more research on the role of institutions in the location strategies of MNEs.

As has been noted in the introduction, prior sections in this epilogue and several of the chapters, Economic Geography works within epistemological frameworks which are unfamiliar and alien to International Business scholars (whereas the converse is less true). This is a tough nut to crack, as it does require effort to inform oneself about epistemological issues. This is simply part of the price one has to pay to gain access to insights of geographers and it is a fairly ubiquitous challenge in inter-disciplinary work. There is scope here for understanding to be fostered by workshops, special tracks and plenary sessions at conferences and non-technical review articles being published in IB journals. This Companion, we hope, also goes some way to helping bridge this gap – and also convincing some that the benefits are worth it.

There is a significant gap to be filled in enhancing understanding of the creation and maintenance of competitive advantage in service industries and the internationalisation process by which those advantages are exploited in overseas markets. Argument and evidence appear in the chapters by Howells and Lowe, Wrigley and Wood, Bryson, Bagchi-Sen and Schunder, and Beaverstock and Harvey.

There appears to be promise in exploiting more fully evolutionary approaches, both within Economic Geography and International Business. This applies both to the analysis of the dynamics of firm performance and to the evolution of the global economic system as a complex system. The core issues in the evolutionary analysis of variety and selection are especially apposite in the current era where variety, in the shape of the rapid economic development of emerging economies and the rapid internationalisation of some firms from those countries, is presenting both opportunities and threats to MNEs from developed countries. Evolutionary Economics in particular sits well within International Business, which does not style firms as omniscient economic agents, optimising on the basis of flawless calculation, and which recognises, often implicitly, that strategy does emerge in something of a trial and error fashion, as firms experiment and adapt to their changing competitive environment. More specifically, the challenge laid down by Klepper (1996; Klepper & Sleeper, 2005) in his evolutionary approach to clusters, asserting that the propagation of superior routines from the best firms, rather than externalities, is the true source of cluster dynamism, seems well suited to the research agenda in International Business, which has strongly espoused the Resource-Based View of the firm, which asserts that the greater part of differences in firm performance are due to idiosyncratic features of the firm itself.

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Both Economic Geography and International Business are somewhat lacking in their understanding of the dynamics of institutional change. Again, given the complex evolution of the global economic system and the increase in the heterogeneity of the institutional environments which are now critical to MNEs and, indeed, the institutional backgrounds from which MNEs emerge, this lacuna warrants serious attention. Basic questions are: how will the institutional environments in emerging economies alter as a result of (i) the rapid internationalisation of some of their indigenous firms and (ii) the rapid increase of the activities of developed economy MNEs within them. Both sets of MNEs have to cope with the “institutional voids” within emerging economies (Khanna & Palepu, 2006). As the chapter by Jung, Wei and Wu demonstrates, emerging economy MNEs are attracted by high quality institutional environments oversees, as they expand into developed economies, partly in order to upgrade their competitive strengths. Both Economic Geography and International Business have paid limited attention to the selection mechanism, whereby some firms die as others prosper. Given the growing intensity of international competition, this again appears as a research gap to be filled.

As Rigby notes, it is a moot point whether the pluralisation of Economic Geography and its multiplicity of “turns” has improved its substantive grip on the key questions which are core to its research. This begs the question of whether trying to leverage insights from International Business will really improve matters from the geographer’s perspective, or whether yet another turn will serve only to weary people and muddy the waters? Rigby identifies three areas where the combined efforts of (Evolutionary) Economic Geography and International Business may yield valuable fruit: understanding the co-evolution of firms and their institutional environments; building better data to understand the changing geographic patterning of economic activity; and understanding the complex geography of knowledge production, management by firms and transmission to create competitive advantage.

Yeung calls for an incorporation of spatial strategy into the framework of corporate strategy in International Business. This creates a research agenda in terms of the conceptualisation of strategy and also an empirical agenda in terms of understanding the extent to which MNEs have a spatial strategy and how they come to formulate and implement it. This leads to a second research agenda suggested by Yeung, to probe how actors in business organisations actually think about space.

In summary, there is an exciting research agenda in view, which invites joint working. Practical actions to encourage it include more special sessions in conferences and special issues of leading journals in each field, a joint workshop series and cooperative ventures such as this Companion. To the list might be added more jointly authored papers, joint bids for research funds and joint supervision of PhD students. Others, with more imagination, can surely think of additional things.

References

Buckley, P.J. & Ghauri, P. (2004) ‘Globalisation, Economic Geography and the strategy of multinational enterprises’, Journal of International Business Studies, 35, pp. 81–98.

Cantwell, J., Dunning, J.H. & Lundan, S.M. (2010) ‘An evolutionary approach to understanding International Business activity: The co-evolution of MNEs and their institutional environment’, Journal of International Business Studies, 41, pp. 567–586.

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Coase, R.H. (1972) ‘Industrial Organization: A proposal for research’, in Fuchs, V.R. (Ed.), Economic Research: Retrospect and Prospect, volume 3, Policy Issues and Research Opportunities in Industrial Organization. Cambridge, MA: National Bureau for Economic Research, pp. 59–73.

Dunning, J.H. (1995) ‘Reappraising the Eclectic Paradigm in an age of alliance capital’, Journal of International Business Studies, 26, pp. 461–491.

Granovetter, M. (1985) ‘Economic action and social structure: The problem of embeddedness’, American Journal of Sociology, 91, 481–510.

Khanna, T. & Palepu, K.G. (2006) ‘Emerging giants: Building world-class companies in developing countries’, Harvard Business Review, October, pp. 60–69.

Klepper, S. (1996) ‘Entry, exit, growth and innovation over the product life cycle’, American Economic Review, 86, pp. 562–583.

Klepper, S. & Sleeper, S. (2005) ‘Entry by spinoffs’, Management Science, 51, pp. 1291–1306.

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Peng, M.W. & Khoury, T.A. (2009) ‘Unbundling the institution-based view of International Business strategy’, in Rugman, A.M. (Ed.), The Oxford Handbook of International Business. 2nd Edition. Oxford, UK: Oxford University Press, pp. 256–268.