Transnational corporations and network effects of a local manufacturing cluster in mobile telecommunications equipment in China

Abstract

SummaryThe local formation, and benefits, of industrial clusters have received considerable research attention during the past decade. We argue that the existing literature has underestimated the role of external economies of collective bargaining and production capacity accruing to firms in clusters that are derived from traded relationships with institutions, firms and customers outside local clusters. We define these benefits as non-cluster economies of traded interdependencies among firms in clusters. To illustrate our arguments, we examine the formation in Beijing, China, of one of the world's few mobile telecommunications manufacturing clusters. We show how Nokia, the lead firm in the local industrial cluster, is able to create non-cluster external economies for its key suppliers co-locating in this purposespecific industrial cluster.

Global delivery models: The role of talent, speed and time zones in the global outsourcing industry

“…Our findings contribute to research on firm internationalization, in particular in B2B industries, by shifting focus from more conventional drivers of entering particular locations, such as resources and market access, to the role of time zones in understanding international expansion. Prior research has emphasized geographical proximity to major clients as an important internationalization motive for suppliers (Martin et al, 1998;Yeung et al, 2006), as evidenced by 'follow-the-client' strategies (Erramilli & Rao, 1990;Bonaccorsi, 1992;Dyer, 1996;Majkgard & Sharma, 1998). In this study, we have argued that physical distance to potential clients and markets due to ICT advancements may become less important (Apte & Mason, 1995;Friedman, 2005;Mithas & Withaker, 2007), but that speed of service delivery and access to talent have become critical concerns driving the global configuration of service delivery units across time zones.…”

“…In manufacturing supplier industries, such as automotive production, location choice has to a large extent been explained by so-called 'follow-the-client' strategies, in which suppliers typically follow their domestic clients in their international expansion process in order to meet the expectation of clients to develop and maintain highly integrated relationships with their main suppliers (Erramilli & Rao, 1990;Bonaccorsi, 1992;Majkgard & Sharma, 1998). Clients and suppliers sharing physical co-location of facilities can lower coordination and transportation costs and also enable better control of supplier performance (Yeung et al, 2006). Similarly, suppliers might be driven in their internationalization process to get closer to important clients in foreign countries in order to better match co-location advantages of their foreign rivals (Martin et al, 1998), and to learn from rivals about how to compete in their domestic markets.…”

“…As mentioned, co-location reduces coordination costs and helps intensify client contacts (Hitt et al, 2006). This is still the case in manufacturing industries (Yeung et al, 2006). Interestingly, even in business services, co-location, in form of temporary onsite services at client sites, was initially an important means to promote client trust and to facilitate coordination of client projects (Saxenian, 2000;Ethiraj et al, 2005).…”

Geely: a trajectory of catching up and asset-seeking multinational growth

“…This was in aims of 'the exchange between foreign technology and Chinese market'. FDI in Chinese automobile industry had important positive externalities in terms of spill-over effects and clustering (Richet et al, 2001;Yeung et al, 2006).…”

Geography of Multinational Corporations and Functional Specialization in Chinese Cities

“…Production plants benefit from localized business links and proximity to management and R&D centers (Yeung et al, 2006), resulting in their agglomeration in the Yangtze River Delta, the Pearl River Delta and the Capital Region (Figure 3). Sales offices and marketing agencies, by contrast, follow the customers (Figure 3).…”