Abstract
Research on the foreign direct investment (FDI) activities of multinational enterprises (MNEs) has a long and rich tradition (Dunning, 2003). Research on the advantages, disadvantages and processes that arise in business clusters has a similar tradition (Marshall, 1890; Porter, 1998). While it is clear that there is a considerable amount of MNE FDI in clusters (Kozul-Wright and Rowthorn, 1998), and that this activity is increasing (Nachum, 2003), the body of research on this interface is small (Birkinshaw and Solvell, 2000). However, it is growing fast in the face of increased globalization, deregulation and advances in information and communication technology all of which have begun to prompt a re-evaluation of the spatial organization of MNE activity both by academic scholars and strategic managers. This chapter asks two related questions to contribute to this small but growing area:
-
1.
Drawing from the extant literature on the MNE FDI/clusters interface, what theoretical reasons might explain the high level of MNE FDI in the ‘City of London’ (a generic term used to include its extension into north and west of London and Canary Wharf to the east) financial services cluster?
-
2.
What are the general attractions of the City that managers in this cluster perceive and how do these relate to the theories identified earlier?
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Agnes, P. (2000) ‘The “End of Geography” in Financial Services? Local Embeddedness and Territorialisation in the Interest Rate Swaps Industry’, Economic Geography, 76 (4), 347–66.
Augar, P. (2000) The Death of Gentlemanly Capitalism ( London: Penguin).
Baptista, R.M.L.N. and G.M.P. Swann (1998) ‘Do Firms in Clusters Innovate More?’ Research Policy 27, 527–42.
Beaverstock, J.V. (1994) ‘Re-thinking Skilled International Labor Migration: World Cities and Banking Organizations’, Geoforum, 25 (3), 323–38.
Birkinshaw, J.M. (1996) ‘How Multinational Subsidiary Mandates Are Gained and Lost’, Journal of International Business Studies, 27 (3), 467–96.
Birkinshaw J.M. and N. Hood (2000) ‘Characteristics of Foreign Subsidiaries in Industry Clusters’, Journal of International Business Studies, 31 (1), 141–54.
Birkinshaw, J.M. and O. Solvell (2000) ‘Preface’, International Studies of Management and Organization, 30 (2), 3–9.
Buckley, P.J. and P.N. Ghauri (2004) ‘Globalization, Economic Geography and the Strategy of Multinational Enterprises’, Journal of International Business Studies, 35, 81–98.
Clark, G.L. (2002) ‘London in the European Financial Services Industry: Locational Advantages and Product Complementarities’, Journal of Economic Geography, 2, 433–54.
Coggan, P. (2002) The Money Machine: How the City Works ( London: Penguin).
Corporation of London (2004) City Economy Digest, Issue 1, February (London: Corporation of London ).
Department of Trade and Industry (DTI) (1998) Our Competitive Future: Building the Knowledge Driven Economy, Cmnd 4176 ( London: HMSO ).
Dunning, J.H. (1993) Multinational Enterprises and the Global Economy ( Reading, Mass.: Addison-Wesley).
Dunning, J.H. (1998) ‘Location and the Multinational Enterprise: a Neglected Factor?’, Journal of International Business Studies, 29 (1), 45–66.
Dunning, J.H. (2000) ‘The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity’, International Business Review, 9, 163–90.
Dunning, J.H. (2003) ‘The Key Literature on IB Activities: 1960–2000’, in A.M. Rugman and T.L. Brewer (eds), The Oxford Handbook of International Business ( Oxford: Oxford University Press ).
Dupuy, C. and J.P. Gilly (1999) ‘Industrial Groups and Territories: the Case of MatraMarconi-Space in Toulouse’, Cambridge Journal of Economics, 23 (2), 207–25.
Enright, M.J. (1998) ‘Regional Clusters and Firm Strategy’, in A.D Chandler, O. Solvell and P. Hagstrom (eds), The Dynamic Firm: the Role of Technology, Strategy, and Regions ( Oxford: Oxford University Press ).
Enright, M.J. (2000) ‘Regional Clusters and Multinational Enterprises’, International Studies of Management and Organization, 30 (2), 114–38.
Golding, T. (2001) The City: Inside the Great Expectation Machine ( London: Prentice Hall).
Gong, H. (1995) ‘Spatial Patterns of Foreign Investment in China’s Cities, 1980–1989’, Urban Geography, 16 (3), 198–209.
Gordon, I.R. and P. McCann (2000) ‘Industrial Clusters: Complexes, Agglomeration and/ or Social Networks?’, Urban Studies, 37 (3), 513–32.
Hamilton, A. (1996) The Financial Revolution ( London: Penguin).
Harrison, B. (1994) Lean and Mean: the Changing Landscape of Corporate Power in the Age of Flexibility ( London: The Guilford Press).
Head, K., J.C. Ries and D.L. Swenson (1995) ‘Agglomeration Benefits and Location Choices: Evidence from Japanese Manufacturing Investments in the United States’, Journal of International Economics, 38, 223–47.
Head, K., J.C. Ries and D.L. Swenson (1999) ‘Attracting Foreign Manufacturing: Investment Promotion and Agglomeration’, Regional Science and Urban Economics, 29 (2), 197–218.
Henderson, J.V. (1986) ‘Efficiency of Resource Usage and City Size’, Journal of Urban Economics, 19, 47–70.
HM Treasury (2003) The Location of Financial Activity and the Euro (London: HM Treasury, Whitehall).
International Financial Services London (2004) ‘International Financial Markets in the UK’, May (available at www.ifsl.org.uk).
International Financial Services London (2005) ‘Offshoring of Services: Impact and Implications’, March (available at www.ifsl.org.uk).
Kozul-Wright, R. and R. Rowthorn (1998) ‘Spoilt for Choice? Multinational Corporations and the Geography of International Production’, Oxford Review of Economic Policy, 14 (2), 74–92.
Kynaston, D. (2001) The City of London: Vol. IV: A Club No More 1945–2000 ( London: Pimlico ).
Markusen, A. (1996) ‘Sticky Places in Slippery Space: a Typology of Industrial Districts’, Economic Geography, 72, 293–313.
Marshall, A. (1890) Principles of Economics ( London: Macmillan).
Morgan, G. (1997) ‘The Global Context of Financial Services: National Systems and the International Political Economy’, in G. Morgan and D. Knights (eds), Regulation and Deregulation in European Financial Services ( Basingstoke: Macmillan Business ).
Nachum, L. (2000a) ‘Economic Geography and the Location of TNCs: Financial and Professional Service FDI to the USA’, Journal of International Business Studies, 31 (3), 367–85.
Nachum, L. (2000b) ‘Global Financial Centers in an Era of Globalization’, Geneva Association for the Study of Insurance Economics, Working paper 233.
Nachum, L. (2003), ‘Liability of Foreignness in Global Competition? Financial Service Affiliates in the City of London’, Strategic Management Journal, 24, 1187–208.
Nachum, L. and D. Keeble (2003) ‘Neo-Marshallian Clusters and Global Networks: the Linkages of Media Firms in Central London’, Long Range Planning, 36, 459–80.
O’Brien, R. (1991) Global Financial Integration: the End of Geography ( London: Pinter/Royal Institute of International Affairs).
Pandit, N.R. and G.A.S. Cook (2003) ‘The Benefits of Industrial Clustering: Insights from the British Financial Services Industry at Three Locations’, Journal of Financial Services Marketing, 7 (3), 230–45.
Pandit, N.R. and G.A.S. Cook (2005) ‘The Clustering of the British Financial Services Industry’, in B. Johansson, C. Karlsson and R. Stough (eds), Entrepreneurship, Spatial Industrial Clusters and Inter-Firm Networks ( Cheltenham: Edward Elgar ).
Porter, M.E. (1990) The Competitive Advantage of Nations ( London: Macmillan).
Porter, M.E. (1998) ‘Clusters and Competition: New Agendas for Companies, Governments, and Institutions’, in M.E. Porter (ed.), On Competition ( Boston, Mass.: Harvard Business School Press ).
Roberts, R. (ed.) (1994) Global Financial Centers. Vol. II: London, New York, Tokyo ( Aldershot: Edward Elgar ).
Sassen, S. (1991) The Global City: New York, London, Tokyo ( Princeton: Princeton University Press).
Sassen, S. (1999) ‘Global Financial Centers’, Foreign Affairs, 78 (1), 75–87.
Swann, G.M.P., M. Prevezer and D. Stout (eds) (1998) The Dynamics of Industrial Clustering: International Comparisons in Computing and Biotechnology ( Oxford: Oxford University Press ).
Taylor, P.J., J.V. Beaverstock, G.A.S. Cook and N.R. Pandit (2003) Financial Services Clustering and its Significance for London ( London: Corporation of London).
Wheeler, D. and A. Moody (1992) ‘International Investment Location Decisions’, Journal of International Economics, 33, 57–76.
Zaheer, S. (1995) ‘Overcoming the Liability of Foreignness’, Academy of Management Journal, 38 (2), 341–63.
Editor information
Editors and Affiliations
Copyright information
© 2006 Palgrave Macmillan, a division of Macmillan Publishers Limited
About this chapter
Cite this chapter
Pandit, N.R., Cook, G.A.S., Ghauri, P.N. (2006). Towards an Explanation of MNE FDI in the City of London Financial Services Cluster. In: Fai, F.M., Morgan, E.J. (eds) Managerial Issues in International Business. The Academy of International Business. Palgrave Macmillan, London. https://doi.org/10.1057/9780230800700_6
Download citation
DOI: https://doi.org/10.1057/9780230800700_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-28024-7
Online ISBN: 978-0-230-80070-0
eBook Packages: Palgrave Business & Management CollectionBusiness and Management (R0)