FDI motives and city location preferences in the automotive and commercial banking industries

Abstract

Cities remain an understudied unit of analysis for understanding the motives of multinational enterprises’ (MNE) foreign direct investment (FDI), with subnational locations in International Business (IB) research to date predominantly captured via the phenomenon of agglomeration. As regional integration projects, such as the European Union and to a lesser degree NAFTA, increasingly reduce the importance of national institutional environments, this paper argues regional and subnational levels become more important for studying MNE location choice. A qualitative deductive bottom-up multiple-case study research design is adopted to study the city location choices and FDI motives of six automotive and six commercial banking companies. These purposefully sampled manufacturing and service MNEs have different home countries and regional orientations. Data on their foreign investments across the ex-tended Triad of Europe, North America and Asia-Pacific were collected for the time period of 2000-2021. Findings suggest that different classes of city tend to attract specific types of FDI and that these patterns might vary across sectors and be influenced by the regional strategic orientations of MNEs. Industry specific findings reveal the importance of related and support industries and partners in a city location for the automotive MNEs, while the commercial banks seek investment opportunities in cities that allow acquisition targets that have an attractive customer based and will improve their local market knowledge. The findings provide evidence in support of MNEs in manufacturing and service industries perceiving the attractiveness of three city types in different ways across the Triad regions.