Research in Global Strategic Management

In his article ‘Regional strategies of service sector multinationals’, Rugman (2003) came to the conclusion that most MNEs in service industries are home region-based, i.e., they have more than 50% of their sales in the home region. In a more recent article, Rugman and Verbeke (2004) found that the vast majority of MNEs included in the Fortune 500, are home-region based. That was a surprising result, as the increasing economic interdependence among nations, the presence of substantial demand for high knowledge intensive goods and services throughout the triad of North America, the European Union and Asia, and the presence of large MNEs in each of the triad regions, all suggest that fierce rivalry for market share would take place throughout the triad. A transaction-cost economics explanation offered by Rugman and Verbeke (2005a) was that the required, location-specific linking investments are far more substantial when firms establish activities outside their home region than inside the home region. Linking investments are critical to permit the profitable deployment of the MNE's non-location bound FSAs across borders. Linking investments are necessary to develop or access location-bound FSAs in host countries (thus permitting national responsiveness), and sometimes to create new, recombined bundles of non-location bound FSAs (permitting increased economies of scale, scope or exploitation of national differences).