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

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。

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Correspondence to Grazia D. Santangelo.

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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

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Keywords

  • location choice
  • labor standards
  • reputational costs
  • liability of foreignness
  • industry specificities