The Impact of Competition and Consumer Preferences on the Location Choices of Multinational Enterprises

In this study, we argue that when undertaking location decisions, multinational enterprises (MNEs) ought to incorporate their competitors' reactions to such decisions as well as consumer preferences for location, in addition to the more standard cost-benefit analyses. We view MNEs as networks of activities connected via product and knowledge flows and develop a game-theoretic, location-allocation mathematical model. A series of computational analyses leads to competitive outcomes and location choices, where even without an explicit modeling of inter-region differences, MNEs show strong tendency toward regionally focused location configurations. Importantly, such regionally focused location configurations can take the shape of regionally focused MNEs or of globally dispersed MNEs with regional structures.