Global Connectedness, Local Disconnectedness and the Connected Multinational

March 24, 2017 @ 10:00 am – 11:30 am America/New York Timezone
RCB - 1122 (CEAR Seminar Room)
College of Business
35 Broad St NW, Atlanta, GA 30303

Speaker Name: Ram Mudambi
Affiliation: Temple University
Location: RCB – 1122 (CEAR Seminar Room)
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ABSTRACT: Two worldviews of the global economy dominate both academic and public discourse. The first view draws on the dramatic decline in spatial transaction costs and the resulting “death of distance”. This view holds that globalization, defined as the interdependence and integration of the global economy, is inexorably rising. In journalistic terms, “the world is flat”. The second view points out that knowledge hotspots and knowledge-intensive clusters account for a disproportionate share of global economic activity and that their dominance is rising. In the words of geographer Richard Florida, “the world is spiky”.

We argue that both worldviews are correct and that they complement one another. The world is connected, and global value chains (GVCs) of innovation and production systematically link global knowledge hotspots and clusters with one another. In the process of replacing local systems with global ones, GVCs are also disconnecting many knowledge centers from their hinterlands of second tier cities, towns and rural areas. As knowledge clusters like Silicon Valley, Boston, Cambridge, Haifa, Shanghai and Bangalore become increasingly connected with one another, they rise above and become disconnected from their local regions.

Mobile multinational enterprises (MNEs) and immobile locations are locked in a co-evolutionary embrace. They need each other in the manner of bees and flowers (Cano-Kollmann et al., 2016). MNE activities create and reinforce linkages between knowledge clusters and the global innovation system, simultaneously exacerbating their disconnection from their local geographies. Using a large-scale dataset, we find that international connectedness and domestic connectedness have different effects on the MNE’s technological scope.