Location and the multinational enterprise

The Early Years My interest in locational economics goes back a long way. Indeed, my first major research project in 1952 was to compare the production and transactional costs of UK radio and TV companies wishing to expand their activities in the prosperous South East and Midlands of the UK with those setting up manufacturing affiliates in the so-called less prosperous regions such as Wales, Scotland, and the North of England, which had suffered from high unemployment in the pre-World War II days. During this project I compared all the relevant costs associated with the two sets of location and found that, at the time, the lower labour, materials, utilities and other value creation costs of operating a branch plant in the less prosperous regions outweighed the additional transaction and administrative costs of so doing (Hague & Dunning, 1954). But it was in American Investment in British Manufacturing Industry (Dunning, 1958) that I first distinguished between differences in productivity between US foreign subsidiaries in a host country (in this case the UK) and that of (a) their parent companies in their home country and (b) their competitors in the host country. The initial impetus for this investigation was that, in the 1950s, in most manufacturing industries the labour productivity of US firms in the US was 2.5 times that of UK firms in the UK. Was this, I pondered, due to the superior technology, management skills and marketing expertise specific to the US firms (what I called the ownership of nationality (O) effect), or was it due to a more economically favourable location in the US compared with the UK (what I called