Skip to main content
SpringerLink
Log in

MNEs’ location strategies and labor standards: The role of operating and reputational considerations across industries

  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

We investigate the role of local labor standards on MNEs’ location decisions across different sectors and sub-national regions within a developing country. We suggest that foreign investors adopt selective location strategies in connection with specific labor standards as a result of reputational and operating considerations. Foreign firms in more hazardous sectors prefer locations with higher occupational health and safety standards because they are more exposed to reputational risks. Those in sectors with less reversible investments prefer locations with lower degrees of unionization because their lower bargaining power increases their sensitivity to operating costs. We test our arguments across 26 sub-national Turkish regions over the period 2005–2011.

Résumé

Nous étudions le rôle des normes locales du travail sur les décisions d'implantation des EMN dans différents secteurs et régions infranationales d'un pays en développement. Nous suggérons aux investisseurs étrangers d'adopter des stratégies d'implantation sélectives en rapport avec des normes spécifiques du travail en raison de considérations liées à la réputation et au fonctionnement. Les entreprises étrangères des secteurs les plus dangereux préfèrent les localisations où les normes de santé et de sécurité au travail sont plus élevées parce qu'elles sont plus exposées aux risques liés à la réputation. Ceux des secteurs où les investissements sont moins réversibles préfèrent les endroits où le degré de syndicalisation est moins élevé parce que leur pouvoir de négociation plus faible augmente leur sensibilité aux coûts de fonctionnement. Nous testons nos arguments dans 26 régions infranationales turques sur la période 2005–2011.

Resumen

Investigamos el papel de los estándares laborales locales en las decisiones de ubicaciones de las empresas multinacionales en diferentes sectores y regiones subnacionales en un país en desarrollo. Proponemos que los inversionistas extranjeros adopten estrategias de ubicación selectiva en conexión con estándares laborales específicos como resultado de consideraciones reputacionales y operacionales. Las empresas extranjeras en sectores más riesgosos prefieren ubicaciones con mayores estándares de salud y seguridad ocupacional puesto que son más expuestos a riesgos reputacionales. Aquellas en sectores inversiones menos reversibles prefieren ubicaciones con menores grados de sindicalización dado a que su bajo poder de negociación aumenta su sensibilidad con los costos de operación. Probamos nuestros argumentos en 26 regiones subnacionales turcas en el periodo 2005–2011.

Resumo

Investigamos o papel dos padrões locais de trabalho nas decisões de localização das MNEs em diferentes setores e regiões subnacionais dentro de um país em desenvolvimento. Sugerimos que investidores estrangeiros adotam estratégias de localização seletivas em relação a padrões trabalhistas específicos, como resultado de considerações reputacionais e operacionais. Empresas estrangeiras em setores mais perigosos preferem locais com padrões mais altos de saúde e segurança ocupacional porque estão mais expostos a riscos de reputação. Aquelas em setores com investimentos menos reversíveis preferem locais com menor grau de sindicalização porque seu menor poder de barganha aumenta sua sensibilidade a custos operacionais. Testamos nossos argumentos em 26 regiões subnacionais da Turquia durante o período de 2005 a 2011.

摘要

我们调查了当地劳工标准对跨国公司在发展中国家不同行业和次国家地区的地点决策中的作用。我们建议外国投资者在声誉和运营考虑的基础上采用与特定劳工标准相关的选择性地点策略。较危险行业里的外国公司更喜欢有较高职业健康和安全标准的地点, 因为它们更容易受到声誉风险的影响。那些可逆投资较少行业的人更喜欢工会化程度较低的地点, 因为他们较弱的谈判力会增加他们对经营成本的敏感度。我们2005至2011年间在26个次国家土耳其地区测试了我们的论点。

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

REFERENCES

  • Artuso, M., & McLarney, C. 2015. A race to the top: Should labour standards be included in trade agreements? Vikalpa, 40: 1–14.

    Article  Google Scholar 

  • Bacow, L. 1982. Bargaining for job safety and health volume 1 of MIT Press Books. London: The MIT Press.

    Google Scholar 

  • Bagirova, N. 2015, December 5. One worker killed, 30 missing after Azeri oil rig fire: Government. Reuters, World News.

  • Baran, P. A. 1957. The political economy of growth. Technical Report. London: Monthly Review Press.

  • Barham, B. L., Chavas, J. P., & Coomes, O. T. 1998. Sunk costs and the natural resource extraction sector: Analytical models and historical examples of hysteresis and strategic behavior in the Americas. Land Economics, 74: 429–448.

    Article  Google Scholar 

  • Bartik, T. J. 1985. Business location decisions in the United States: Estimates of the effects of unionization, taxes, and other characteristics of states. Journal of Business & Economic Statistics, 3: 14–22.

    Google Scholar 

  • Bazillier, R. 2008. Core labor standards and development: Impact on long-term income. World Development, 36: 17–38.

    Article  Google Scholar 

  • Berman, J. E., Webb, T., Fraser, D., Harvey, P., Barsky, J., Haider, A., et al. 2003. Race to the top: Attracting and enabling global sustainable business. Business survey report. Washington: World Bank Group.

    Google Scholar 

  • Bhagwati, J. 2004. In defense of globalization: With a new afterword. Oxford: Oxford University Press.

    Google Scholar 

  • Boeri, T., Helppie, B., & Macis, M., 2008. Labor regulations in developing countries: A review of the evidence and directions for future research. Social Protection and Labor Policy and Technical Notes number 46306. Washington, DC: The World Bank.

  • Brown, D. K., Deardorff, A. V., & Stern, R. M., 2013. Labor standards and human rights: Implications for international trade and investment. In Z. Drabek & P. C. Mavroidis (Eds.), Regulation of foreign investment challenges to international harmonization (pp. 153–195). Singapore: World Scientific Publishing.

    Chapter  Google Scholar 

  • Buckley, P. J., Doh, J. P., & Benischke, M. H. 2017. Towards a renaissance in international business research? Big questions, grand challenges, and the future of IB scholarship. Journal of International Business Studies, 48: 1045–1064.

    Article  Google Scholar 

  • Caplan, A. J., & Silva, E. C. 2005. An efficient mechanism to control correlated externalities: Redistributive transfers and the coexistence of regional and global pollution permit markets. Journal of Environmental Economics and Management, 49: 68–82.

    Article  Google Scholar 

  • Carlton, D. W. 1983. The location and employment choices of new firms: An econometric model with discrete and continuous endogenous variables. The Review of Economics and Statistics, 65: 440–449.

    Article  Google Scholar 

  • Chang, S. J., & Park, S. 2005. Types of firms generating network externalities and MNCS’ co-location decisions. Strategic Management Journal, 26: 595–615.

    Article  Google Scholar 

  • Collins, B., & Fleischman, L. 2013. Human rights and social conflict in the oil, gas, and mining industries: Policy recommendations for national human rights institutions. Oxfam America research backgrounder series, Technical Report.

  • Contractor, F. J. 2017. Global leadership in an era of growing nationalism, protectionism, and anti-globalization. Rutgers Business Review, 2: 163–185.

    Google Scholar 

  • Cotula, L. 2014. Addressing the human rights impacts of land grabbing. Technical Report. Brussels: European Union.

  • Cotula, L., Vermeulen, S., Leonard, R., & Keeley, J., 2009. Land grab or development opportunity? Agricultural investment and international land deals in Africa. Technical Report. London: FAO, IIED and IFAD.

  • Daly, H. 1993. The Perils of free trade. Scientific American, 269: 51–55.

    Article  Google Scholar 

  • Davies, R. B., & Vadlamannati, K. C. 2013. A race to the bottom in labor standards? An empirical investigation. Journal of Development Economics, 103: 1–14.

    Article  Google Scholar 

  • Defever, F. 2012. The spatial organization of multinational firms. Canadian Journal of Economics, 45: 672–697.

    Article  Google Scholar 

  • Devereux, M. P., Griffith, R., & Simpson, H. 2007. Firm location decisions, regional grants and agglomeration externalities. Journal of Public Economics, 91: 413–435.

    Article  Google Scholar 

  • Dowell, G., Hart, S., & Yeung, B. 2000. Do corporate global environmental standards create or destroy market value? Management Science, 46: 1059–1074.

    Article  Google Scholar 

  • Duanmu, J. L. 2014. A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries. International Business Review, 23: 620–634.

    Article  Google Scholar 

  • Duncan, G. J., & Stafford, F. P. 1980. Do union members receive compensating wage differentials? American Economic Review, 70: 355–71.

    Google Scholar 

  • Dunning, J. H. 1998. Location and the multinational enterprise: A neglected factor? Journal of International Business Studies, 29: 45–66.

    Article  Google Scholar 

  • Ederington, J., Levinson, A., & Minier, J. 2005. Footloose and pollution-free. The Review of Economics and Statistics, 87: 92–99.

    Article  Google Scholar 

  • Fernandez-Muniz, B., Montes-Peon, J. M., & Vazquez-Ordas, C. J. 2009. Relation between occupational safety management and firm performance. Safety Science, 47: 980–991.

    Article  Google Scholar 

  • Fiedler, Y., & Karlsson, J. 2016. Home country measures that promote responsible foreign agricultural investment: Evidence from selected OECD countries. FAO Commodity and Trade Policy Research Working Paper number 52. Rome: FAO.

  • Galib, M., Munny, K., & Lin, D. 2011. A case study about worker unrests in Indian automobile industry. International Business and Management, 3: 74–78.

    Google Scholar 

  • Gifford, B., Kestler, A., & Anand, S. 2010. Building local legitimacy into corporate social responsibility: Gold mining firms in developing nations. Journal of World Business, 45: 304–311.

    Article  Google Scholar 

  • Gorg, H. 2005. Fancy a stay at the ’Hotel California’? The role of easy entry and exit for FDI. Kyklos, 58: 519–535.

    Article  Google Scholar 

  • GRAIN. 2012. Squeezing Africa Dry: Behind every land grab is a water grabg. Technical Report. www.grain.org/article/entries/4516-squeezing-africa-dry-behind-every-land-grab-is-a-water-grab. Accessed 2 April 2019.

  • Hilber, C., & Voicu, I. 2010. Agglomeration economies and the location of foreign direct investment: Empirical evidence from Romania. Regional Studies, 44: 355–371.

    Article  Google Scholar 

  • Javorcik, B. S., & Spatareanu, M. 2005. Do foreign investors care about labor market regulations? Review of World Economics (Weltwirtschaftliches Archiv), 141: 375–403.

    Google Scholar 

  • Johanson, J., & Vahlne, J. E. 2009. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40: 1411–1431.

    Article  Google Scholar 

  • Kapelus, P. 2002. Mining, corporate social responsibility and the “community”: The case of Rio Tinto, Richards Bay minerals and the Mbonambi. Journal of Business Ethics, 39: 275–296.

    Article  Google Scholar 

  • Kobrin, S. J. 2017. Bricks and mortar in a borderless world: Globalization, the backlash, and the multinational enterprise. Global Strategy Journal, 7: 159–171.

    Article  Google Scholar 

  • Kolk, A. 2016. The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51: 23–34.

    Article  Google Scholar 

  • Kostova, T., & Zaheer, S. 1999. Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management, 24: 64–81.

    Google Scholar 

  • Kucera, D. 2002. Core labour standards and foreign direct investment. International Labour Review, 141: 31–69.

    Article  Google Scholar 

  • Lamin, A., & Livanis, G. 2013. Agglomeration, catch-up and the liability of foreignness in emerging economies. Journal of International Business Studies, 44: 579–606.

    Article  Google Scholar 

  • Ma, X., Delios, A., & Lau, C. M. 2013. Beijing or Shanghai? The strategic location choice of large MNEs’ host-country headquarters in China. Journal of International Business Studies, 44: 953–961.

    Article  Google Scholar 

  • McFadden, D. L. 1984. Econometric analysis of qualitative response models. In Z. Griliches & M. D. Intriligator (Eds), Handbook of econometrics (pp. 1395–1457). Amsterdam: Elsevier.

    Chapter  Google Scholar 

  • McFadden, D., & Train, K. 2000. Mixed MNL models for discrete response. Journal of Applied Econometrics, 15: 447–470.

    Article  Google Scholar 

  • Meyer, K., & Nguyen, H. V. 2005. Foreign investment strategies and sub-national institutions in emerging markets: Evidence from Vietnam. Journal of Management Studies, 42: 63–93.

    Article  Google Scholar 

  • Meyer, K. E., Witteloostuijn, A., & Beugelsdijk, S. 2017. What’s in a p? Reassessing best practices for conducting and reporting hypothesis-testing research. Journal of International Business Studies, 48: 535–551.

    Article  Google Scholar 

  • Moffat, K., & Zhang, A. 2014. The paths to social licence to operate: An integrative model explaining community acceptance of mining. Resources Policy, 39: 61–70.

    Article  Google Scholar 

  • Morantz, A. 2009. The elusive union safety effect: Towards a new empirical research agenda. In Proceedings of the 61st annual meeting of the labor and employment relations association.

  • Myles Shaver, J., & Flyer, F. 2000. Agglomeration economies, firm heterogeneity, and foreign direct investment in the United States. Strategic Management Journal, 21: 1175–1193.

    Article  Google Scholar 

  • Narula, R. 2015. The viability of sustained growth by India’s MNEs: India’s dual economy and constraints from location assets. Management International Review, 55: 191–205.

    Article  Google Scholar 

  • Nielsen, B. B., Asmussen, C. G., & Weatherall, C. D. 2017. The location choice of foreign direct investments: Empirical evidence and methodological challenges. Journal of World Business, 52: 62–82.

    Article  Google Scholar 

  • Olney, W. W. 2013. A race to the bottom? Employment protection and foreign direct investment. Journal of International Economics, 91: 191–203.

    Article  Google Scholar 

  • Ottaviano, G. I., & Pinelli, D. 2006. Market potential and productivity: Evidence from Finnish regions. Regional Science and Urban Economics, 36: 636–657.

    Article  Google Scholar 

  • Ozaslan, M., Dincer, B., & Ozgur, H. 2006. Regional disparities and territorial indicators in Turkey: Socio-economic Development Index (SEDI). In European regional science association conference papers.

  • Patten, D. M. 1992. Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory. Accounting, Organizations and Society, 17: 471–475.

    Article  Google Scholar 

  • Peng, M. W., Wang, D. Y. L., & Jiang, Y. 2008. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39: 920–936.

    Article  Google Scholar 

  • Rabbiosi, L., & Santangelo, G. D. 2018. Host country corruption and the organization of HQ-subsidiary relationships. Journal of International Business Studies, 50: 1–14.

    Google Scholar 

  • Rivoli, P., & Salorio, E. 1996. Foreign direct investment and investment under uncertainty. Journal of International Business Studies, 27: 335–357.

    Article  Google Scholar 

  • Roberts, P. W., & Dowling, G. R. 2002. Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23: 1077–1093.

    Article  Google Scholar 

  • Rodrik, D. 2017. Populism and the economics of globalization. NBER Working Papers number 23559. Cambridge: National Bureau of Economic Research, Inc.

  • Rodrik, D. 1996. Labor standards in international trade: Do they matter and what do we do about them? In R. Lawrence, D. Rodrik, & J. Whalley (Eds), Emerging agenda for global trade: High stakes for developing countries. Washington, D.C.: Overseas Development Council, Johns Hopkins University Press.

    Google Scholar 

  • Santangelo, G. D. 2018. The impact of FDI in land in agriculture in developing countries on host country food security. Journal of World Business, 53: 75–84.

    Article  Google Scholar 

  • Scherer, A. G., & Palazzo, G. 2007. Toward a political conception of corporate responsibility: Business and society seen from a Habermasian perspective. Academy of Management Review, 32: 1096–1120.

    Article  Google Scholar 

  • SIGWATCH. 2016. Corporations that NGOs loved and hated in 2015. Technical Report. http://www.sigwatch.com/fileadmin/Free_downloads/SIGWATCH_-_Corporations_NGOs_loved_and_hated_in_2015_FREE.pdf. Accessed 2 April 2019.

  • Spar, D. 1998. The spotlight and the bottom line. How multinationals export human rights. Foreign Affairs, 77: 7–12.

    Article  Google Scholar 

  • Spence, R., & Mulligan, H. 1995. Sustainable development and the construction industry. Habitat International, 19: 279–292.

    Article  Google Scholar 

  • Spencer, J., & Gomez, C. 2011. MNEs and corruption: The impact of national institutions and subsidiary strategy. Strategic Management Journal, 32: 280–300.

    Article  Google Scholar 

  • The Guardian. 2011. Glencore reveals record of fatalities and environmental fines by Leo Hickman and Fiona Harvey.

  • The Guardian. 2015. Nestlé admits to forced labour in its seafood supply chain in Thailand.

  • The Telegraph. 2014. Turkey mining disaster: What makes mining in Turkey so dangerous? www.telegraph.co.uk/news/worldnews/europe/turkey/10831301/Turkey--mining--disaster--what--makes--mining--in--Turkey--so--dangerous.html. Accessed 2 April 2019.

  • Tole, L., & Koop, G. 2011. Do environmental regulations affect the location decisions of multinational gold mining firms? Journal of Economic Geography, 11: 151–177.

    Article  Google Scholar 

  • Train, K. E. 2009. Discrete choice methods with simulation. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Turkish Ministry of Economy. 2014. Uluslarararsi Dogrudan Yatirimlar 2014 Yili Raporu. Ankara: Turkish Ministry of Economy, Annual FDI report.

  • United Nations. 2016. World economic situation and prospects statistical annex. New York.

  • van der Ploeg, F. 2011. Natural resources: Curse or blessing? Journal of Economic Literature, 49: 366–420.

    Article  Google Scholar 

  • Wesseling, C., McConnell, R., Partanen, T., & Hogstedt, C. 1995. Agricultural pesticide use in developing countries: Health effects and research needs. International Journal of Health Services, 27: 273–308.

    Article  Google Scholar 

  • Wettstein, F., Giuliani, E., Santangelo, G. D., & Stahl, G. K. 2019. International business and human rights: A research agenda. Journal of World Business, 54: 54–65.

    Article  Google Scholar 

  • World Bank. 2010. Rising global interest in farmland. Technical Report: Washington, D.C.

  • Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38: 341–363.

    Google Scholar 

  • Zhang, J., & Luo, X. R. 2013. Dared to care: Organizational vulnerability, institutional logics, and MNCS’ social responsiveness in emerging markets. Organization Science, 24: 1742–1764.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Ca’ Foscari University of Venice, Cannaregio 873, Fondamenta San Giobbe, 30121, Venice, Italy

    Daniela Maggioni

  2. Department of Strategy and innovation, Copenhagen Business School, Kilevej 14a, 2000, Frederiksberg, Copenhagen, Denmark

    Grazia D. Santangelo

  3. Department of Economics, Baskent University, Fatih SultanMah. Eskisehir Yolu 18.km 06790, Etimesgut, Ankara, Turkey

    Seda Koymen-Ozer

Authors
  1. Daniela Maggioni
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Grazia D. Santangelo
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Seda Koymen-Ozer
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Grazia D. Santangelo.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Supplementary information accompanies this article on the Journal of International Business Studies website (www.palgrave.com/ journals).

Accepted by Bo Nielsen, Consulting Editor, 2 March 2019. This article has been with the authors for four revisions.

Electronic supplementary material

Below is the link to the electronic supplementary material.

Supplementary material 1 (pdf 286 KB)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Maggioni, D., Santangelo, G.D. & Koymen-Ozer, S. MNEs’ location strategies and labor standards: The role of operating and reputational considerations across industries. J Int Bus Stud 50, 948–972 (2019). https://doi.org/10.1057/s41267-019-00231-x

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41267-019-00231-x

Keywords

Search

Navigation