Making Investment Choices: Japanese MNEs Investing in Australia and the Region

Elizabeth Maitland, Stephen Nicholas, Economics Research Centre, William Purcell

Article

Regions and countries compete for MNEs. Surprisingly, we know little about policy effectiveness and the relative importance of policy factors and non-policy factors in managerial location decisions. Drawing on internalisation-resource, trade and location theory, this paper develops a model of policy and non-policy location variables, testing the model against 137 Japanese managers??decisions to invest in Australia and the ASEAN5 (Thailand, Singapore, Malaysia, Indonesia and the Philippines). Japanese managers treated Australia and ASEAN5 as different regions, but treated the ASEAN5 as the same region. A range of non-policy variables were ranked higher than policy variables as factors attracting Japanese MNEs to Australia or the ASEAN5, while policy variables were most important in shifting investment between ASEAN5 countries. In a study of incentive effectiveness, managers ranked the same incentive variables for Australia lower than for the ASEAN5. We also discovered that the transfer of parent competencies to subsidiaries in Australia was ranked significantly lower in importance than competencies transferred to ASEAN5 countries. Implications for policy-makers and economic development are drawn.

Keywords

Round Building

Article