This paper attempts to examine theoretically and empirically the explanatory power of concepts drawn from economic geography for the explanation of the location of TNCs. It combines concepts from economic geography and international business theories in a model that seeks to explain the location of Transnational Corporations (TNCs), and tests the model on financial and professional service FDI to the US. The findings suggest a need to extend the conventional location model of international business by acknowledging the processes taking place among firms located in geographic proximity.

Recent research has addressed the heterogeneity among MNEs in terms of their tendency to agglomerate. In this paper, we extend the scope of the firm-specific attributes considered to affect this agglomeration tendency by examining product differentiation. We find significant association between product differentiation and the preferences of firms for proximity to other firms in their industry. These findings imply that the value of agglomeration varies for firms pursuing different product differentiation strategies. We propose a conceptualization of product and location differentiations as two related dimensions of MNEs’ strategy.

We suggest that the proximity of a country to other countries is a factor that affects its choice as a multinational enterprise (MNE) location. We introduce the concept of a country's proximity to the global distribution of knowledge, markets, and resources, and frame this concept as a function of both geographic distance and the worldwide spatial distribution of these factors. We test our location model on a data set comprising 138,050 investments undertaken by U.S. MNEs worldwide. Our findings show that the proximity of a country to the rest of the world has a positive impact on MNEs choosing that country as a location. Proximity to the world's knowledge and markets are stronger drivers of location choice than is proximity to the world's resources, after accounting for the country's own endowments. Larger firms are able to benefit more from remote locations than smaller firms are.

In this commentary we build on Shenkar's (2001) award-winning critique of cultural distance, arguing that most distance constructs, in fact, suffer the same flaws because they oversimplify the relationship between countries, overlook their subjective and context-specific nature, and pay insufficient attention to the mechanisms through which distance operates. The idea of distance, however, has intrinsic value. Moreover, its considerable appeal and undeniable effectiveness have made it a well-entrenched construct. Therefore we see merit in redressing its weaknesses, and offer several suggestions for doing so. These include allowing for the influence of firm-level characteristics that either moderate the effects of distance or render distance – at least in part – subjective with varying consequences for different MNEs; maintaining directionality by distinguishing between distance and the tendency toward a particular characteristic and acknowledging asymmetry; and conceptualizing the effects of distance and the mechanisms through which it operates more carefully by drawing on concepts and measures from a variety of disciplines. By offering ways to strengthen both its theoretical foundations and measurement, we hope to enhance the usefulness of one of international business theory's most central constructs.

We conceptualize the MNE as a portfolio of interdependent sub-units, and examine its growth trajectory in relation to its existing portfolio. The empirical testing is based on a unique dataset that details all the location moves of US legal services MNEs during 1949–2006. These MNEs evolve in directions that follow from their past. Their portfolios affect their subsequent moves, speaking for the impact of interdependencies among sub-units on the evolution of MNEs. The portfolio exercises stronger impact on entry than on exit, suggesting that different forces affect MNEs’ expansion and contraction. We outline strategic and organizational implications of the conceptualization of the MNE as a portfolio.