Strategy and geography: The impact of firm rivalry on location choices in global high -tech industries.

Abstract

This dissertation explores the impact of firm rivalry and firm heterogeneity on location choices made by MNEs across countries. In industries with limited number of relevant competitors, firms engage in strategic interaction investing resources to limit competitors' choices. Strategic interaction among firms is especially important in industries where firms need to sell globally in order to recover R&D investments or multiple potential industry standards exist. Firm rivalry is modeled using strategic interaction where firms and countries are heterogeneous, markets are imperfectly competitive and location choices are endogenous. The model provides three main general predictions. First, differences in firm capabilities, modeled as differences in marginal costs, generate difference in location choices. Second, in equilibrium, more capable firms maintain more monopolistic markets since they deter competitors more easily and are not forced to exit markets when rivals enter. Consequently, firms that are more capable collocate less. Third, the impact of firm capabilities on location decisions emerges when competition exists. In the early periods, firms show low levels of collocation regardless of firm capabilities. Models estimated using OLS, Multiple Regression Quadratic Assignment Procedure, and Tobit, support these predictions.