FDI location choice: the role of locational ambidexterity

Abstract

Purpose

This paper proposes locational ambidexterity as a location-specific factor based on an operation flexibility perspective, and explores why and how multinational corporations (MNCs) proactively deal with uncertainty by valuing locational ambidexterity in making location decisions.

Design/methodology/approach

Location choice data for foreign direct investment (FDI) at a sub-national level in China is used to test the role of locational ambidexterity.

Findings

We find that FDI generally prefers locations with high ambidexterity. Moreover, investments from a heterogeneous country context are more sensitive to locational ambidexterity than those from a similar country context. However, there is no significant evidence that wholly owned investments favor locational ambidexterity more than do international joint ventures.

Research limitations/implications

An alternative operationalization of locational ambidexterity may be needed. Future research could explore the sources of locational ambidexterity, identify other firm- and industry-level factors that could alter the value of ambidexterity, investigate how MNCs integrate locational ambidexterity into organization-specific option creation strategies and test the ambidexterity perspective with micro-level location choice data.

Practical implications

Locational ambidexterity may reduce the overall risk and adjustment cost of future changes. FDI may choose a location with high ambidexterity, i.e. a balanced portfolio of location-specific determinants, under uncertainty about the future.

Originality/value

Drawing on the notion of location flexibility from Buckley and Casson (1998), this study identifies a new location character, locational ambidexterity, and proposes that MNCs address uncertainty by choosing ambidextrous locations that offer more flexibility for MNCs to change or respond to potential volatility. Selecting locations with high ambidexterity is thus an alternative and complement to the organization-specific flexibility creation strategies suggested by the literature on real option and flexibility.

Citation

Huang, S. and Cantwell, J. (2017), "FDI location choice: the role of locational ambidexterity", Multinational Business Review, Vol. 25 No. 1, pp. 28-51. https://doi.org/10.1108/MBR-04-2016-0016