Why the Home Region Matters: Location and Regional Multinationals

Abstract

Much of the literature in international business analysing the multinational enterprise uses the country as the relevant environmental parameter. This paper presents both theoretical and empirical evidence to demonstrate that country‐level analysis now needs to be augmented by analysis at the ‘regional’ level of the broad triad markets of E urope, N orth A merica and the A sia P acific. The great majority of the world's 500 largest firms concentrate their activities within their home region of the triad. This study uses variance component analysis and finds that this home region effect outperforms the country effect. Together, the regional and industry effects explain most of the geographic expansion of multinational enterprises ( MNE s), whereas country, firm and year effects are very minor. The new data and variance component analysis on the activities of large MNE s reported here suggest that new thinking is required about the importance of large regions of the triad as the relevant unit of analysis for business strategy to supplement the conventional focus on the country.