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Multinationals, Institutions and Innovation in Europe

Periodic Reporting for period 3 - MASSIVE (Multinationals, Institutions and Innovation in Europe)

Reporting period: 2018-06-01 to 2019-11-30

This project aims to uncover the fundamental drivers of global investment flows and their impacts on national and regional economies. Understanding these ‘tectonic forces’ of the contemporary world economy calls for the conceptualisation and operationalisation of the heterogeneity of global flows of capital, knowledge and skills bundled into investment flows. Highly diversified firms, countries and regions are connected across the globe, responding to the challenges of growing internationalisation with heterogeneous strategies resulting in evolving (and sometimes conflicting) corporate behaviour and public policies.

The project investigates the location strategies of Multinational Enterprises (MNEs) and their territorial impacts by exploring the diversity of actors involved and the heterogeneity of their linkages with an innovative combination of conceptual and empirical tools. Each section of the project addresses a set of gaps in the existing literature, shedding new light on the factors shaping the economic geography of MNEs and their impacts, providing policy-makers at all levels with new tools to promote innovation, employment and economic recovery after the Great Recession. The project is organised around two key research pillars:

‘Location Strategies, Regions and Institutions’ – This Pillar aims to explore the ways in which MNEs contribute to the formation of ‘global’ pipelines / networks by exploring their geographical, institutional and socio-economic drivers as well as their directionality, nature and intensity.

‘The impacts, Institutions and Regional Innovation’ – This Pillar explores the national, regional and firm-level impacts generated by the linkages established by MNEs through global investment flow and investigates how different geographical and institutional factors can shape these processes.

The analysis and discussion of public policies for both location and impacts is a cross-cutting theme that connects the two main pillars: ‘Public Policies for Location and Impacts’ – This part of the project aims to identify the key policy lessons to be learnt from the EU Experience (and its global comparison with the rest of the world) and place them in the framework of the EU industrial and regional policy.

Each pillar is developed into a total of ten Key Intermediate Goals (including the cross-cutting public policy theme) where, through theoretical models and empirical analyses, the answers to the research questions outlined above are laid out.
"From Pillar (1) ‘Location Strategies, Regions and Institutions’ key intermediate goals #1 (‘Location, nature and intensity of the activities de-localised by MNEs in the EU countries and regions’) and #2 (‘Likelihood of foreign acquisitions in the EU’) are completed with two academic papers on location strategies of MNEs already published, two more papers ready for submission on institutions and location strategies and entry mode choices respectively (covering both greenfield investments and acquisitions in a joint framework). A new dataset linking firm-level information on investing companies with detailed geographical and functional information on their global investment over the entire world has been completed. This will allow for a global location choice analysis (Goal#4 - ‘Comparative Analysis of location factors’) and the analysis of the link between inward and outward investments (Goal #3 - ‘How are ‘outward’ and ‘inward’ FDI flows linked’). Key Intermediate Goal #5 (‘The current economic crisis and the spatial organisation of the value chain of MNEs in the EU region’) – given its relevance to the post-crisis EU policy debate – has been given priority and completed with the publication of a leading research paper that has contributed to 50th anniversary special issue of Regional Studies.

From Pillar (2) ‘The impacts, Institutions and Regional Innovation’ – Key Intermediate Goal #6 (‘Involvement in MNE Networks and regional performance in terms of innovation and employment’) has advanced remarkably with three papers ready for submission. Key Intermediate Goal #7 (‘Comparative analysis of territorial innovation dynamics’) has also advanced, benefiting from the world-wide coverage adopted in one of the papers under Goal#6 that naturally lends itself to comparative analysis as well as from the development of an innovative datasets for the United Stated States, Latin America, Russia and an exploratory analysis for China (two published papers, two ready for submission). Intermediate Goals #8 (‘Outward and inward FDI and employment levels and innovation performance’), #9 (the linkages and networks of MNEs subsidiaries in the host regions) are at the preparation stage.

The cross-cutting theme that connects the two main pillars ‘Public Policies for Location and Impacts’ (Intermediate Goal #10 - ‘Policy tools to leverage global pipelines’) is benefitting from the development of an innovative dataset on the policies pursued by EU countries for the attraction of FDI in order to investigate their impacts in terms of both location of FDI and regional performance.
Innovation is highly geographically concentrated and its spatial distribution tends to remain stable over time. However, the process of technological development still opens windows of opportunity for new innovation centres to emerge around the world. What makes it possible for some cities and regions to join the exclusive ‘world innovation club’? Why other places remain persistently excluded or lose their membership? What are the fundamental differences between innovative and non-innovative regions?
Scholarly and policy debates have been dominated by the attempt to identify factors at the national, regional or city level to be leveraged to ‘ignite’ innovation and boost productivity in stagnating areas of the world. Much more limited remains our understanding of the transformative power of the flows of capital, skills and knowledge bundled into increasingly complex value chains often controlled by multinational firms.
This project has developed new conceptual foundations and new empirical evidence from across the globe on the link between internationalisation, multinational firms’ strategies and regional innovation and prosperity. The project has developed new evidence on how multinationals decide where to locate different types of foreign activities along the value chain and how this process leads to the ‘matching’ between firms and host regions. The project has also shed new light on the consequences of these decisions and strategies for world cities and regions, discussing specific examples from Europe, the United States, China, India, Russia and Latin America. The third part of the project addresses the role of public policies and offers new insights on how mayors, regional governors and national governments can effectively leverage global investment flows and value chains for innovation and recovery after the Great Recession.