An Empirical Study of Service Sector Clustering and Multinational Enterprises

This paper examines the small but growing literature that offers explanations for multinational enterprise (MNE) location in geographical business clusters. It tests some of the propositions of this literature against the findings of a study which compares MNEs and non-MNEs regarding the advantages and disadvantages of a location in the City of London financial services cluster, an agglomeration noted for its extraordinarily large MNE component. The primary conclusion is that MNEs and non-MNEs have different and multiple motives for locating in the cluster. There are two business policy recommendations. For MNEs that are cluster incumbents, because strong clusters have disadvantages (high expense and congestion) and because advantages can change over time, they need to continually assess which activities they need to locate in a cluster and which can be elsewhere. The second recommendation is for MNEs that are not located in relevant clusters, clusters may provide advantages over and above those available to non-MNE competitors.