Embedding the Multinationals? Institutions and the Development of Overseas Manufacturing Affiliates in Wales and North East England

Abstract

PHELPS N. A., MACKINNON D., STONE I. and BRAIDFORD P. (2003) Embedding the multinationals? Institutions and the development of overseas manufacturing affiliates in Wales and North East England, Reg. Studies 37 , 27-40. The impact of foreign direct investment (FDI) upon host regions is a topic of perennial interest within the fields of regional economics, industrial geography and regional development. Much of the early literature here draws negative conclusions regarding the wider indirect impacts of FDI on host regions, pointing to the branch plant syndrome. In light of significant processes of corporate restructuring and the build-up of host region institutional capacities, however, recent literature has claimed that the plants of multinational enterprises (MNEs) are becoming increasingly "embedded' in regional economies. Against this backdrop, this paper aims to provide a critical assessment of the regional "embeddedness' of FDI in Wales and the North East of England. Based upon an extensive survey of overseas-owned manufacturing affiliates in these regions, the paper examines key indicators of MNE embeddedness, and assesses the influence of regional agencies on the embedding process. In general, we find little evidence of increasing embeddedness while the effects of regional differences in institutional capacity on the embedding process appear to be somewhat limited. As such, we suggest that the idea of " extended enclaves' encapsulates some key dimensions of the relationships between MNEs and the economies of peripheral UK regions. PHELPS N. A., MACKINNON D., STONE I. et BRAIDFORD P. (2003) Ancrer les multinationales?: les institutions et le developpement des filiales industrielles etrangeres au pays de Galles et dans le nord-est d'Angleterre, Reg. Studies 37 , 27-40. Les retombees de l'investissement direct etranger (IDE) sur les zones d'accueil est un sujet d'inte ret perpetuel dans les domaines de l'economie re gionale, de la geographie industrielle et de l'amenagement du territoire. Dans une large mesure, la premiere documentation a ce sujet tire des conclusions negatives quant aux retombees indirectes importantes de l'IDE sur les zones d'accueil, faisant allusion au syndrome des etablissements. Cependant, a la lumiere de la restructuration d'entreprise et du developpement des capacites institutionnelles de la zone d'accueil, la documentation recente affirme que les etablissements des multinationales deviennent de plus en plus " ancrees' dans des economies regionales. Sur ce fond, cet article cherche a faire une critique de "l'ancrage' regional de l'IDE au pays de Galles et dans le nord-est d' Angleterre. A partir d'une enquete detaillee aupre s des filiales industrielles a capital etranger situees dans ces regions-la, cet article cherche egalement a examiner les indicateurs cle de l'ancrage des multinationales et a e valuer l'influence des assemblees regionales sur le processus d'ancrage. En regle generale, une augmentation du degre "d'ancrage' s'avere peu evidente alors que les effets des divergences re...

Re-investment and the survival of foreign-owned plants

“…Belderos et al, 2001;and Andersson et al, 2002). It is given operational meaning in a recent study by Phelps et al (2003), who identify the plant-level characteristics associated with "embeddedness". These are the plant's function and position in the corporate hierarchy; level of research and development; skills demand; its reliance on local supply chains; and its investment behaviour, specifically re-investment, i.e., 2 repeat investment.…”

Domestic Sourcing by Foreign-Owned Subsidiaries

“…This literature indicates that the use of local networks composed of other firms, R&D agencies such as universities and government research bodies, local authorities, chambers of commerce, and other organisations can help FOS to attain their objectives (Andersson and Forsgren, 2000;Andersson et al, 2002;Crone and Roper, 2001;Crone and Watts, 2003;Phelps et al, 2003). These local networks increase the ability to benefit from collective learning and to realise innovation advantages that is associated with linkages to valuable sources of information and knowledge.…”

“…This work has been extensively applied to business and management studies, organisational studies, and economic geography. Attention has been focused on business networks, socioeconomic networks, the institutional underpinning of networks, and the importance of local, regional, national, and international networks (Andersson et al, 2002;Ivarsson, 2002;Phelps et al, 2003;Simmie and Sennett, 1999). This literature reveals that the importance of networks for business activities, particularly the proximity of network connections, is complex and multifaceted.…”

“…There is literature that suggests that there is a positive relationship between the granting of autonomy mandates and the use of networks (Andersson and Forsgren, 2000;Davis and Meyer, 2004;Holm et al, 2003;Phelps et al, 2003;White, 2004). Coordination benefits in managing the various factors involved in managing local-supply chains should also be available from combining the development of autonomy mandates and the use of local networks (Danese et al, 2005).…”

“…These types of approach have been advocated as a means to achieve regional-development objectives by boosting the spillover effects available from developing local-supply chains (Crone and Roper, 2001;Huggins, 2001;Phelps et al, 2003;Potter et al, 2003;White, 2004).…”