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Topic 3 (Hymer's locational advantages. (Tariffs and non-tariff…
Topic 3
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Intangible advantage:
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However ownership advantage alone does not provide a convincing explanation for MNEs. A firm could exploit these through exporting. One must look at location factors.
Ex: Apple identify which places bring higher advantages over particular value - adding activities and cordinating them
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Why MNEs important?
Because they have the capacity to move technologies and ideas around the world. This gives them the potential to serve as engines of growth, Jones (1996)
Dunning (1993): Multinational enterprise is an enterprise that engage in FDI and owns and control value - adding activities in more than one country.
Hymer: 2 assumptions.
- There are disadvantages when operating in a foreign market and owning and controlling assets oversea.
- Firms must own advantages (include tangible and non-tangible) that outweigh the disadvantages.
- There must be a net benefit, this exist within ownership
Advantages:
Tangible advantage:
- Innovatory product
- Innovatory Process
- Size economies
Intangible advantages
- Advanced managerial capabilities or system
- Particular sets of knowledge
- Ownership of brand and reputation.
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Advantages over local firms:
- In foreign markets, local firms were assumed to process superior knowledge about the markets, resources, legal and political systems, legal and culture.