ABSTRACT
It is generally recognised that the choice of sites of foreign based enterprises will be dominated by locational considerations that are different from those affecting similar choices of national enterprises (Vernon, 1974). What is not clear both from the existing literature and the available statistical evidence is whether the investment location decisions of MNEs tend to strengthen the agglomeration tendencies prevailing in the spatial structure of the market economies. Blackbourn (1974) finds that foreign based enterprises, and especially American enterprises in Europe, have an obvious preference for the developed areas of heavy industrial concentration. He argues that unfamiliarity with national market conditions drives managers of MNEs to select apparently safe locations among potential sites so that they can reduce uncertainty and eliminate unacceptable risks. Another writer (Klemmer, 1979) has argued that MNEs tend to prefer existing areas of industrial concentration as part of a locational strategy of loss minimisation in the event of a commercial failure. The probability of such a failure is thought to be higher in an unfamiliar environment. Central locations offer a reasonable chance of speedily selling premises and capital equipment with minimum loss. However, observing the locational patterns of European MNEs investing in the US economy, Faith (1972, ch. 8) found a heavy concentration of direct investment of these MNEs in areas of labour surpluses and with a recent history of industrial development.
