The importance of cities in location choice A multiple case study in the telecommunications industry
Master Thesis
MSc. Business Administration – International Management Supervisor: Dr Johan Lindeque Second reader: Dr Niccolò Pisani Student: Sebastian Mats Weesjes Student ID: 10505512 Date: 29th of June 2015 Word count: 17 951
Statement of Originality
This document is written by Student Sebastian Mats Weesjes who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the content.
2 Abstract This research adds to the location choice literature, specifically the national versus subnational location discussion, by investigating how well city characteristics explain location choice for multinationals with strong intangible firm specific advantages. By looking at the location choice of multinationals in the telecommunication sector and linking them to specific cities (characteristics) the overlooked city level of analysis is investigated. The paper builds on Rugman & Verbeke’s (2004) argument that Multi National Enterprises (MNEs) have a more regional strategic orientation (as opposed to a global orientation). The study favours a location-choice based on subnational analysis; resulting in the influence-annex-importance of cities (characteristics). Through a multiple case study, this research shows that the reasoning behind certain investments can be derived from the characteristics of cities.
Keywords: city characteristics, location choice, telecommunication sector.
3 Acknowledgements First and foremost I would like to thank my supervisor Dr Johan Lindeque for the constant support in guiding me through this thesis process. His determination and patience helped me finalize this document. His enthusiasm and love for the field made me work hard whenever possible and push me to get the absolute best out.
I would also like to thank my (extended!) family and girlfriend for the help, support and unconditional love given during this thesis writing process. And last but not least I would like to thank all my friends for keeping me sane and for showing me that it is possible to write a thesis.
4 Table of Contents
Statement of Originality ...... 2 Abstract ...... 3 Acknowledgements ...... 4 Index of Tables...... 6 1. Introduction ...... 7 2. Literature review ...... 10 2.1 Location ...... 10 2.2 Location Choice ...... 11 2.3 Cities ...... 13 Typology of cities ...... 13 Characteristics ...... 14 2.4 Summary ...... 17 3. Methodology...... 18 3.1 Research design and strategy ...... 18 3.2 The Telecommunications Sector ...... 20 Case selection ...... 21 3.3 Data Collection ...... 22 3.4 Data analysis ...... 24 4. Within-case Analysis ...... 27 4.1 América Móvil ...... 27 4.2 AT&T ...... 31 4.3 Verizon ...... 34 4.4 Deutsche Telekom ...... 37 4.5 Telefónica ...... 39 4.6 Vodafone ...... 42 5. Discussion ...... 45 6. Conclusion ...... 50 6.1 Limitations and suggestion for future research ...... 51 6.2 Scientific relevance and managerial implications...... 51 7. References ...... 52 8. Appendices ...... 58
5 Index of Tables
3. Methodology ...... 18 Table 1: Company Overview ...... 23 Table 2: Overview of investments (deals) made and used ...... 24 Table 3: Overview of secondary data collected and used ...... 24 Table 4: Codebook ...... 25 Table 5: Explaination of city ranking ...... 26
4. Within-case Analysis ...... 28 Table 6: América Móvil’s investments ...... 29 Table 7: AT&T’s investments ...... 32 Table 8: Verizon’s investments ...... 36 Table 9: Deutsche Telekom’s investments ...... 38 Table 10: Telefónica’s investments ...... 40 Table 11: Vodafone’s Investments ...... 43
5. Discussion ...... 45 Table 12: Cross-case analysis ...... 47 Table 13: Influence on working propositions ...... 49
6 1. Introduction It is said that there are only three things that matter in real estate; location, location and location. This does not only apply to the real estate sector; location is also very relevant in International Business. In his work Dunning (1998) names location as one of the three most important aspects in foreign direct investment (FDI). Dunning (2001) addresses location as the locational attractiveness of alternative countries. Also, in other current International Business and International Strategy literature ‘location’ is often treated as synonymous for ‘countries’ (Piscitello, 2011). This could potentially create misunderstandings or missed opportunities when discussing an important aspect of FDI such as location. Beugelsdijk and Mudambi (2013) mention that subnational spatial heterogeneity is often the characteristic that drives firm strategy and therefore it is essential that International Business scholars integrate the knowledge of economic geography, where location is less confined by national borders
(Beugelsdijk, McCann, & Mudambi, 2010). Also, McCann and Mudambi (2004) state that there is a need for a greater integration of economic geography in the International Business literature for this reason. In this shift to implementing economic geography, Goerzen, Asmussen and Nielsen (2013) call for a further exploration of the role of cities as locations, which will be the main focus of this thesis.
“In 2008, the world reaches an invisible but momentous milestone: For the first time in history, more than half its human population, 3.3 billion people, will be living in urban areas. By 2030, this is expected to swell to almost 5 billion” (Martine & Marshall, 2007, p. 1). In 2014 the percentage of people living in urban areas has increased to 54% and is believe to rise to 66% by 2050; adding another 2.5 billion residents to our cities (UN, 2014). This shows the importance of looking at cities in
(International) Business, as two thirds of future customers and workforce will be located in cities.
In the social sciences the concept of cities has been developed further, Sassen (2005) introduced the concept of the global city. She mentions that because of privatisation there is a change away from interstate connection and that the shift to a focus on cities means a strong emphasis on strategic components of global economy (i.e. emphasis on network economy). Traditional International
Business scholars examining location dimensions have had the assumption of the country as the main unit of analysis; this while subnational location heterogeneity is often the attribute that is the force
7 behind firms’ strategy (Beugelsdijk & Mudambi, 2013). In this vein Goerzen et al. (2013) establish that three city-factors are of importance to firms; global interconnectedness, cosmopolitanism and abundance of advanced producer services. They underwrite McCann & Acs’ (2011) argument that the size of city is less important than its interconnectivity.
Hymer (1972) already argues that when Multinational Enterprises (MNEs) choose a location they pick a place, a city, based on three types of activities. Level III for day-to-day operations, level II for coordination of level III managers and level I for top management. In an extension, this study also creates three tiers of cities, one for each type of activities (Hymer, 1972). This ties in with Dunning’s
(1998) location choice theory for MNEs, although he discussed location choice in a more country- specific sense. Dunning (1998) formulated a framework with four kinds of behaviour motivating location choice; natural resource seeking, market seeking, efficiency seeking and strategic-asset seeking. The later three can all be directly applied to cities, as natural resource seeking is mostly affected by country-level (often non-city) endowments. In the case of strategic-asset seeking, or innovation seeking, it is obvious to think of locations as Silicon Valley (computing), London (financial services) or Bangalore (information technology) that are recognised areas for many innovations (Peng,
2012). This type of strategic-asset seeking is of most importance when dealing with knowledge intensive industries (Dunning, 1998).
Mudambi (2008) further mentions that the rising share of intangibles highlights the role of knowledge-intensive & creative industries. The location focal point lead these firms to geographically disperse their value chain, making these industries important to look at for future location choice research. According to Mudambi (2008) what is missing in the International Business literature is the focus on the importance of cities when analysing location in knowledge-intensive industries, which is realized in the economic geography literature, for example by Scott & Stroper (2007).
As shown above, what has been under-addressed in the International Business literature on location choice is the city dimension. “Location behaviour of MNEs is crucial for explaining why cities are knowledge centres” (McCann & Acs, 2011, p.26), it could perhaps also work the other way around: can city characteristics help explain the location choice of MNEs.
8 This study will look at service sector MNEs with strong intangible Firm Specific Advantages
(FSA) from the telecommunication industry, a sector that has been long been thriving on national regulation but from the 90’s took a flight in both technological progress and competition (Gerpott,
Rams, & Schindler, 2001). The telecommunication industry is interesting to look at since it has been a sector where countries often established state-owned telecom companies, but now have mostly opened up their markets, allowing (global) mergers and acquisitions (M&A) (Al-Kaabi, Demirbag, &
Tatoglu, 2010). Secondly, “due to the nature of mobile technology and its reliance on large infrastructural capital, telecom companies are more susceptible to joint ventures (JVs) and M&As as companies find such ventures easier to partner with other companies than to undertake the huge risky investment of rolling out their own infrastructure from scratch” (Al-Kaabi et al., 2010). Which makes strategic-asset seeking a key issue when choosing a location (Dunning, 1998). Mudambi (2008) and
Dunning (1998) both discuss the importance of intangible assets in knowledge-intensive industries; in these industries location seems to play a less significant role. The extent to which that is true in the telecommunication sector, a sector where the swift technological progress has played a key part in the development of economies (Gerpott et al., 2001), leads to the research question of this study:
How well do city characteristics explain the location choice of MNEs with strong
intangible FSA’s?
In the next section the conceptual foundation for this thesis will be further developed; the location choice theory and the need for a clearer distinction between national and subnational level. In this the concept of city (as introduced above) will play a significant role. With this foundation, cases from the telecommunication industry will be discussed and analysed, in order to answer the research question.
9 2. Literature review This study explores the location choice of MNEs in industries with strong intangible FSAs
(specifically in the telecommunication industry), with a focus on the role of cities. Where FSAs are the firm’s specific advantages as conceptualized by Rugman & Verbeke (1992). MNEs’ activities are often taken as a synonym for global business, but the assumption that there is one global market is a myth (Rugman, 2001). Rugman and Verbeke write in their 2004 paper that most multinationals are not doing business in a global setting, but in a regional setting. The main reason for this regionalisation is the liability of foreignness (LoF) (Rugman & Verbeke, 2007), a term that describes the additional costs companies are confronted with when operating in another country (Zaheer, 1995). This regionalisation research (Rugman & Verbeke, 2004) shows a division of the world in regions and that most MNEs are home-regional oriented or bi-regional orientated, mostly active in and between two regions (for example North America and Europe). Rugman and Verbeke (2004) end their argument that (corporate) strategies should be paying more attention to the concept of regionalisation. In this light further investigation should then be given to the sublevels of the current units of analysis, where the locations within a region are more important than the entire region(s) (or countries) themselves; subnational and subregional. A concept that is the execution of gaining location advantages which can tie in with FSAs (Dunning, 1998; Rugman & Verbeke, 1992). The following sections will discuss the importance of location and location choice. The chapter will end with an exploration on the city as a location. Here the role of cities in International Business will be considered (Goerzen et al., 2013;
Hymer, 1972; Nachum & Wymbs, 2005) and the selected city characteristics/dimensions will be presented.
2.1 Location Vernon (1966) argues that a product or service does not necessarily have similar sales results in every country; one location might hold an advantage over another when selling the same product. Location is important and its location advantages make it relative to other locations more attractive for investments (Verbeke, 2009). In the era of globalization, geography (location) is seen to be less important when looking at competition (Porter, 1998), but with the regionalisation theory in the back of our minds we could question if there is really an era of globalisation. Other studies show the
10 importance of location (Dunning, 1998) and found that country (location) effects can even be as strong as industry effects (Makino, Isobe, & Chan, 2004). Extensive research on location and its advantages especially took-off when Dunning introduced his eclectic paradigm in the 1970’s (Dunning, 2001).
This eclectic, or OLI (Ownership, Location and Internalization), paradigm deals with the determinants of foreign direct investment (FDI) and the foreign activities of MNEs (Dunning, 2000) by discussing the ‘who’, ‘where’ and ‘how’. In this, the variable set for location concerns the locational attractions of alternative countries. “This sub-paradigm avers that the more the immobile, natural or created endowments … favour a presence in a foreign, rather than a domestic, location, the more firms will choose to augment or exploit their O [ownership] specific advantages by engaging in FDI” (Dunning,
2000, p.164).
Even though this eclectic theory gained attention, according to Dunning (1998; 2009) location remained a neglected factor. One point he makes both in this article and in his earlier paradigm work is that location advantages are inseparable from ownership advantages, a claim reinforced by Itaki
(1991). Not all locations are good for all MNEs, which means the location itself can be considered as a firm specific advantage (Zaheer & Nachum, 2011) in which the firm must create advantage from the location. It is the firm’s ability to build a relationship with a place, its sense of place, which will give the location value for the MNE (Dicken & Malmberg, 2001). Verbeke (2009) classifies this as a location-bound FSA, one that is not necessarily transferable to another location (or company). It is not only about the (intangible) FSAs or the location; it concerns their recombination. Meaning the MNE not only transfers its existing FSAs from another location, but also creates new ones (Verbeke, 2009) by combining the transferred FSAs with country specific advantages (CSA). Motives for relocation and investing in a (new) location will be addressed in the next paragraph.
2.2 Location Choice As clear from the introduction and the previous paragraph, the role of location was for a long time a neglected factor (Dunning, 1998; Porter, 1994), but was nevertheless not absent from the study of competition (Porter, 1994). “The role of location long followed that of the theory of trade where locational choices and locational effects were only based on an input cost minimization framework”
11 (Porter, 1994, p.35). Think of land, labour and capital, but later this changed to other motives for choosing locations. As outlined in the introduction of this paper, four motives for location choice can be identified; market seeking, natural resource seeking, efficiency seeking and strategic-asset seeking
(Dunning, 2000). The activity concerned with finding or satisfying foreign markets are labelled as market seeking, for example setting up sales offices or acquiring existing companies with a market share in that specific location. When gaining access to natural resources, such as crude oil, unskilled labour or minerals, it is referred to as natural resource seeking. Those activities aimed to designing labour and production more efficiently can be categorized in efficiency seeking (Dunning, 2000). And finally “firms [that] would engage in FDI not only to transfer their resources to a host country, but also to learn, or gain access to, the necessary strategic assets available in the host country” (Makino, Lau,
& Yeh, 2002, p. 405), this would be labelled as strategic-asset seeking. Under this gaining institutional knowledge or access can also be labelled strategic-asset seeking.
Over the years strategic-asset seeking has become one of the most important FDI motives
(Dunning, 2009). “Such FDI is similar in intent to that of a natural resource-seeking investment in earlier times but, its locational needs are likely to be quite different” (Dunning, 2009). The locational needs are different due to the strategic considerations and the availability of assets (such as technology or labour expertise). These intangible assets benefit from certain locations, such as spatial clusters
(Dunning, 2009). Clusters or agglomerations have always thrived because of the learning processes taken place in those locations, some scholars argue that they are “the territorial configuration most likely to enhance learning places” (Malmberg & Maskell, 2002, p. 429). The concept of agglomeration can be explained as the “phenomena that people and economic activity tend to concentrate in cities or industrial core regions” (Malmberg & Maskell, 2002), it becomes even more interesting to look what makes these cities so interesting to locate to, and create clusters.
“It is argued that the existing location approaches within the IB literature as currently specified, are entirely inadequate for analyzing MNE location behavior at the regional level”
(McCann & Mudambi, 2004, p.492), these include the transnational regions (as introduced by
Rugman & Verbeke, 2005) as well as those at a subnational level. It is therefore needed to address another level of analysis; cities
12
2.3 Cities In the development of trade and resource systems, urbanisation was and still is the key of economic growth (Findlay & O'Rourke, 2007; Mitchener & Weidenmier, 2008). As pointed out earlier the world moves to an even more urbanised world, with two thirds of its population in cities by 2050 (UN,
2014). Especially for knowledge-intensive industries this means their core resource, people, are located in cities. As put forward in the introduction of this paper the concept of cities needs to be explored further, especially in International Business (Goerzen et al., 2013). So far the level of analysis within location choice has been global, regional or national. This while cities become more important as a level of analysis; city perspective gives insight to the relevance of MNE location strategy (Nachum & Wymbs, 2005) and can thus be a good indicator for location choice.
In other disciplines, social sciences and geographical economics, the concept of cities has been explored more. The concept of the global city (Sassen, 2005) has gained a lot of attention in social sciences and paved the road for other scholars. Sassen (2005) introduces another formulation of questions of power. According to her work the power lies with the network of the global cities.
McCann & Acs (2011) show that the role of MNEs drives the city (regions), which in turn drives the national economies. It is the connection or synergy amongst cities and between city and MNEs that is most important and which creates growth. In order to have a better understanding of how to use cities in location choice, it is important to distinguish the different cities; what types of cities can be classified.
2. Typology of cities As geography scholars Beaverstock, Smith & Taylor (1999) point out, there has been a range of typologies for categorising cities. “Imperial cities, primate cities, great industrial cities, millionaire cities, world cities, global capitalist cities, international financial centres, megacities and global cities are all well-known designations” (Beaverstock et al., 1999, p.445). The different typologies of cities show the need to study cities; the ranking of cities is not absolute. The type a city can be categorised by changes in industries and the synergy with the MNEs. The centre status in different industries can determine the city’s ‘world cityness’ value, and that can be ranked in alpha, beta and gamma world
13 cities (Beaverstock et al., 1999). This insight is helpful; the indicators you include in assessing cities will ultimately determine their ranking. This suggests that by focusing solely on a ranking of cities is not always a good way to develop insights on where to locate. An industry specific ranking or investigation would yield more, hence this study is using a specific sector and city characteristics for its analysis.
In the introduction Hymer (1972) was introduced with his typology of the ‘3 Tiers’, based on the decision making of an MNE. For example headquarters would be ideally placed in a capital city with access to the government, media etc. This study will use the typology of Hymer (1972) as its base. In this, the level I cities are those cities that are chosen because of top management decision making, level II cities coordinate the day-to-day activities of level III. Hence cities can be labelled according to the kind of decision-making of most MNEs in that city, and it can also be used to label cities within an MNE in order to establish a hierarchical ranking for further reference. Here extra characteristics can be added on to the tiers in order to get the complete picture for an industry, as will be demonstrated in the next section.
2. Characteristics Certain characteristics of cities are more important to determine the MNE’s location behaviour.
Economic geographers such as Scott (1999) see the effect of the city as being more important than the effect of size and scope of the firm or the nation-state. McCann and Acs (2011) ask whether the scale of a country, a city or firm is most important. They take a historical approach and outline the importance of the city (and its scale) over time. They come to the conclusion, as outlined earlier in the introduction, that the size of a city is less important than its global connectivity. Bigger is not better, so when easy-to-look-at demographics (such as geographical size and populations) become less important it is necessary to look at different characteristics of a city. This does not mean that those
‘easy’ demographics should be neglected, but should be included in the total ‘effect’ of a city on the location choice. McCann and Acs (2011) also found that the size could be a dominant factor in newly industrialising economies.
14 A ranking of cities cannot merely be determined as a universal list accounting for all situations and companies. In this vein it is important to determine the characteristics of cities depending on the type of MNE or industries. This study aims to establish more insight to the importance of cities in knowledge intensive industries, more specifically the telecommunication industry. Technology developments and the deregulations in the telecommunication industry at the start of this century have brought many changes. “These changes will have profound implications for both infrastructure and service providers, for users, and indeed, for the future direction of the new economy” (Li & Whalley, 2002, p. 452). These changes cause the industry to move from value chains to value networks (Li & Whalley, 2002). This network dimension should thus be kept in mind when looking at the characteristics. Although this is important the main dimension that leads the characteristics in this study is that of location choice.
The market seeking location choice of MNEs is considered with finding a market for products and services. Size of population and wealth here are important characteristics that determine attractiveness of a new market. However, market seeking MNEs do not only depend on this ‘resource’ but also on infrastructure, marketing and information resources for operation and expansion (Luo,
2003). These dependants are not only concerned with market seeking MNEs, but also strategic asset- seeking ones. As established above, the MNEs in the telecommunication industry are (mostly) concerned with these two location choice strategies. It is a knowledge intensive industry, which relies on its intangible FSAs such as strategic alliances and research & development (R&D) (Al-Kaabi et al.,
2010). The characteristic of knowledge should thus also be included.
Legislation and more specifically licenses are another important facet of the business of telecommunication firms; with the privatisation of state telecommunication companies at the end of last century there came a lot of regulatory measures (Intven, 2000). The ownership of these licenses and the ability to access them can be considered intangible FSAs and should be represented in the set of characteristics of the city to be located to.
As outlined above, these characteristics can explain the location choice of MNEs with strong intangible FSAs (e.g. telecommunication MNEs), when they are market seeking and/or strategic-asset
15 seeking. These characteristics are population size, knowledge, legislative influence and global connectivity.
Population size
For many centuries increased wealth has been in correlation with urbanisation (Findlay & O'Rourke,
2007). The more the economy would grow the more urbanisation took place, creating large cities with a relative wealthy population. Creating a potential market for businesses, high city population will also reduce transaction costs. As McCann & Acs (2011) point out, this characteristic is more important for newly industrialising nations/economies. Leading towards the first working proposition:
WP1. Cities with a large population size are interesting for telecommunication companies to locate to
for market seeking.
Urban knowledge Capital
It goes without saying that knowledge is an important dimension to look at in the telecommunication industry, because of the knowledge intensity of the sector. Highly skilled labour is needed for R&D, which makes universities interesting to examine. This will also attract (smaller) companies that could be acquired. Also, a higher employment density in a city will result in more knowledge; “the nation’s densest locations play an important role in creating the flow of ideas that generate innovation and growth” (Carlino, Chatterjee, & Hunt, 2007, p. 389). This, as well as professionals coming from all over the world, creates a new type of capital called urban knowledge capital (Sassen, 2010). Which leads to working proposition two:
WP2. Cities with a higher urban knowledge capital are interesting for telecommunication companies
to locate to for strategic-asset seeking
Legislative influence
In order to gain and maintain licenses it is necessary to stay close to legislative powers (to lobby decision-makers), which is important “in the context of global commercial alliances and increasing international competition” (Bartle, 1999, p. 376). Lobbying or building relationships with the
16 legislators can be understood as investing into “political capital” (Yoffie & Bergenstein, 1985) and since business operations are influenced by the policies it is important to treat this political capital as an important asset to the firm. Especially for companies in the telecommunication sector, whose deals are often dependent on the legislation being made by the government (e.g. when acquiring national carriers). Leading to the third working proposition:
WP3a. Those cities that house the legislative power of their country/state are interesting for
telecommunication companies to locate to for strategic-asset seeking.
WP3b. Those cities that house the legislative power of their country/state are interesting for
telecommunication companies to locate to for market seeking purposes as they give access to
the whole market of the country.
Global connectivity
Global connectivity is mostly concerned with a company’s type I activities (Hymer, 1972). It is also the characteristic that some scholars claim to be more important than size (Goerzen et al., 2013;
McCann & Acs, 2011; Sassen, 2005). Others add that global connectivity has become another way to measure how healthy and strong a city and its region is (Taylor & Lang, 2005). It then becomes interesting as an indicator for MNEs when locating, which leads to the fourth working proposition:
WP4a. Those cities with a high global connectivity are more interesting for telecommunication
companies to locate to for strategic-asset-seeking
WP4b. Those cities with a high global connectivity are more interesting for telecommunication
companies to locate to for market seeking
2.4 Summary
This chapter started with a short exploration of the existing literature and a recap of the missing elements in the literature. The main point being that within location choice there should be more attention given to cities. Next, the importance of location was discussed and the literature behind location choice followed. With Dunning (2001) and his framework as a starting point, this section concluded with the importance of the various types-of-seeking categories and strategic-asset seeking
17 being the most important for knowledge-based-intensive industries. Having established the importance of cities and the types of seeking, the last section of this chapter focused on cities and their role in the growth of economies. It also touched upon the typology of cities of which Hymer’s (1972) three tiers typology was at the base. This chapter ended with the characteristics that are most in-line with the location choice motives (market-seeking and strategic-asset seeking); Size, Urban Knowledge Capital,
Legislative Influence and Global Connectivity. Based upon these characteristics four working proposition were formulated for further analysis.
3. Methodology In this chapter the methodology of the study will be outlined. In the first section the research design and strategy will be clarified and justified; through a short general explanation of methodologies the section will arrive at the design used for this study. Then there will be a paragraph on the strategy used for the analysis, this theory in combination with the quality criteria gives a base on which the analysis decisions were made. An investigation of the telecommunication sector and the explanation of the case selection will follow. The chapter will end with a section on the data collection and a section on the data analysis.
3.1 Research design and strategy The more a study asks a ‘how’ or ‘why’ research question the more likely a case study will be relevant
(Yin, 2009). When planning such a study the quality of the design should be tested by the degree of:
(1) construct validity (2) internal validity (3) external validity and (4) reliability. These measurements influence the number of cases to be selected; a single case study or a multiple case study. The first one is concerned with only one case where as a multiple case study both investigates within the case situation and across the cases of the same study (Yin, 2014).
The design of this thesis will be a multiple case study in multiple contexts to determine if a generalisation could be made regarding the various contexts within the same industry. This multiple case study will also help answer the ‘how’ and ‘why’ of a research question (Yin, 2009) and since this study is aimed towards how city characteristic can explain location choice, a (multiple) case study would be more applicable. In this, all four types of measurements as outlined by Yin (2014), will be
18 used to ensure the credibility of the study’s findings. "By combining multiple observers, theories, methods, and empirical materials, researchers can hope to overcome the weakness or intrinsic biases and the problems that come from single-method, single-observer, single-theory studies” (Jakob,
2001)This notion of ‘triangulation’ will be used to not only increase the validation and reliability of the study, but also to enhance the understanding of the study (Yeasmin & Rahman, 2012). This study will mostly concern data triangulation (in the form of using multiple sources) and to some extent method triangulation (specifically the combination of quantitative research and qualitative research).
In the following paragraph the strategy behind the analysis will be showcased.
“The analysis of case study evidence is one of the least developed and most difficult aspects of doing case studies” (Yin, 2009, p.127). Yin (2009) speaks of four general strategies when talking about analysis strategies in qualitative research. First there is ‘relying on theoretical propositions’, Yin describes this as the most preferred strategy. Here the propositions will have guided the data collection plan, highlighting the relevant analysis (Yin, 2009). ‘Developing a case description’ is a less preferable strategy and serves more as an alternative when encountering difficulties with the first strategy. In the second strategy the research develops a descriptive framework for the case study.
Using both qualitative and quantitative data is a combination that can be described as a strong analytical strategy. Since the added quantitative data can cover behaviour that the case study is trying to explain and may be related to an embedded unit of analysis. The fourth strategy that Yin refers to, examining rival explanations, can be applied to the other three strategies and deals with contradicting findings. These contradictions, or rivals, could affect the case study analysis.
The strategy for this analysis will be one that combines qualitative and quantitative data, although the quantitative data will be specifically used to select and categorise cases. The working propositions developed through the literature review will make up the driving force for analysing the qualitative data. Given the general strategy, five analytical techniques are relevant (pattern matching, explanation building, time-series analysis, logic models and cross-case syntheses) (Yin, 2009). The pattern matching technique is used to strengthen the internal validity by comparing an empirically based pattern with a predicted one. With explanation building, the goal is to find one explanation for
19 multiple cases. The time-series analysis technique refers to certain movements in a given time
(period). Using these techniques a logical model can be established and applied across cases. In short this study uses a combined strategy of both qualitative and quantitative data for analysis. All five analytical techniques (Yin, 2009) will be applied when called for.
3.2 The Telecommunications Industry
As previously mentioned this study focuses on the telecommunication industry, due to the great interest in strategic-asset seeking in this sector. The shift to intangibles that Dunning (2009) addresses is also present in this industry. In particular, the cases referred to in this study have their core business based on the consumer, making licensing and service (intangibles) of upmost importance. An important note here is that these assets can also be the basis of a market-seeking motive (e.g. in
M&As). The telecommunications industry is also interesting to look at because it is a network-based utility that used to be organised as a national monopoly (Bartle, 1999). “With the development of global networks, commercial alliances and high global competition, telecommunications is a paradigm of globalization” (Bartle, 1999, p. 366), linking it directly to the function of (global) cities as nodes in the global network. Telecommunication multinationals now compete on coverage and a variety of features interrelated due to network-effects (Chan-Olmsted & Jamison, 2001).
Liberalisation and privatisation in the telecommunication industry are two significant changes in the past decades. At the end of the last century more then half of the countries in the Americas
(70%) and Europe (55%) had privatised their national carries (International Telecommunication
Union, 2000). “The Americas (36%) and Europe (39%) have also seen the highest percentages of countries that allow competition in basic telecommunications service” (Chan-Olmsted & Jamison,
2001, p. 9). This liberalisation and privatising also posed new challenges for the MNEs operating in the telecommunication sector. Since many new market opportunities lie in those areas, MNEs have to adapt entry strategies that access local knowledge (Chan-Olmsted & Jamison, 2001).
Policy-makers in Europe and the Americas were (and still are) stimulating this liberalisation and competition. Making sure there is rigid infrastructure and network service requires a strong centralised authority (Lehr & Kiessling, 1998). The effects of these policies are that the investments
20 have to be approved by the government (and/or EU or federal governments). For the European Union
(EU) this means transferring some responsibly from the national regulators to a central regulatory entity and for the United States of America (USA) in a similar fashion, but then from the states to federal level (Lehr & Kiessling, 1998). The call for such an entity resulted in the creation of the EU’s electronic communication regulatory framework (ECRF) in 2003, which forms the basis of national telecommunication laws in its member-states (Nyaga, 2014). In the USA the federal communication commission (FCC) is a central regulatory entity, which is still operating under the Telecommunication act of 1996 (Walden, 2012). This act aimed at opening up the market and introduced competition as well as cross-state regulation, but still left most regulatory power at state-level. Since then no major change in the act has occurred (Walden, 2012). More broadly, the Inter-American Telecommunication
Commission (CITEL) has been constructed and entrusted with the coordination of telecommunications within the Americas (Lin, 2002). Furthermore the North American Free Trade Agreement (NAFTA), which has Canada, Mexico and the USA as its members, included a chapter in their agreement on telecommunication; “Chapter 13 of NAFTA is devoted to addressing deregulation, harmonization, market access, tariff reduction, and cross border investment issues in the telecommunications equipment and services sectors among members” (Lin, 2002, p. 40).
Case selection The method of selecting the six cases for this study follows the approach of Rugman & Verbeke
(2004). They determined that the sales of major companies of the Fortune Global 500 (2012) determine their regional orientation and that this is often just a one or two region(s) orientation.
Although this work has been criticised, because some scholars argue that sales is not a good indicator
(Dunning, Fujita, & Yakova, 2007; Osegowitsch & Sammartino, 2008), it is also considered a relevant study to the field. Dunning et al. (2007) add that the sales of a region in combination with the degree of FDI in a region show the actual orientation. For this study the work of Rugman & Verbeke (2004) has been used as an example to determine the orientation of the Global Fortune 500 companies in the
Telecommunication industry. The FDI motives are used in a later stage to pinpoint the city orientation of location choice. Out of the Global Fortune 500 (2012) telecommunication companies three large
European and three large North American firms were chosen; Deutsche Telekom, Vodafone and
21 Telefónica (Europe) and AT&T, Verizon and América Móvil (North America). The main reason for this selection is that there are three firms with their origins in North America and whose home countries are member of the NAFTA and there are three firms whose countries of origin are within the
EU. An intriguing element is that all the European firms have a bi-regional orientation and those in
America a home-region orientation, with the expectation of América Móvil that has a bi-regional orientation including South America. This allows for some homogeneity between cases and also for some heterogeneity between the groups of cases.
3.3 Data Collection In order to establish a complete analysis, various types of data were collected. As described above the regional orientation of the companies were determined using the method as set out by Rugman &
Verbeke (2005). In 2013 a group of students of the University of Amsterdam looked at company reports of the Fortune Global 500 (2012) MNEs and determined the regional orientation of those firms by looking at number of employees, assets and sales a company had in a certain region. This data was used to select the cases as shown in the previous section.
In order to gather city dimensions, a list of cities had to be created. This was achieved by collecting data on FDI from the Zephyr (2014; 2015) database on mergers & acquisitions (M&A) and joint ventures (JV). Since the Zephyr database only includes FDI deals made between two or multiple companies, non-greenfield investments, company records (including corporate websites) were accessed to check for greenfield investments. Both the completed deals from the Zephyr database and the greenfield investments were gathered over a ten year time period (from January 2004 until January
2014). Ideally each investment will include the date, status, entry mode, country and city. Out of this data a list of cities can be created. Unfortunately this was not possible for all the investments, as they did not all include a city. Also, internal reinvestments (e.g. buying back stock) were excluded in this study since these cannot be considered FDI. The greenfield investments were limited due to the costs associated with them in this industry (Al-Kaabi et al., 2010). No names of cities for these investments were found, leaving them out of the dataset.
22
Firm and origin Home region Orientation Fortune Global First paragraph in ‘about us’ on company website (Fortune, 2012) 500 (2012) rank
Deutsche Telekom Europe Bi-regional 82 “Deutsche Telekom is one of the world’s leading integrated Bonn, Germany telecommunications companies, with some 151 million mobile customers, 30 million fixed-network lines, and more than 17 million broadband lines.” Vodafone Europe Bi-regional 89 “We’ve come a long way since making the first ever mobile call in the UK on Newbury, Berkshire, 1 January 1985. Today, more than 400 million customers around the world United Kingdom choose us to look after their communications needs. In 30 years, a small mobile operator in Newbury has grown into a global business and one of the most valuable brands in the world. We now operate in around 30 countries and partner with networks in over 50 more.” Telefónica Europe Bi-regional 105 “Telefónica is one of the largest telecommunications companies in the world Madrid, Spain in terms of market capitalisation and number of customers. With its best in class mobile, fixed and broadband networks, and innovative portfolio of digital solutions, Telefónica is transforming itself into a ‘Digital Telco’, a company that will be even better placed to meet the needs of its customers and capture new revenue growth.” AT&T North America Home region 32 “AT&T is bringing it all together - helping people mobilize their worlds - New York, New York, with advanced mobile services, next-generation TV and high-speed Internet United States* services, and smart solutions for businesses.”
Verizon North America Home region 50 “Every day, we connect millions of people, companies and communities with New York, New York, our powerful network technology. Not many companies get the chance to United States ** change the industry and the world through innovation. We do.”
América Móvil North America Home region 176 “A good knowledge of the region… A sound capital structure… Efficiency Mexico City, Mexico that relies on our vast operational experience… All of these have allowed us to consolidate our position as the leading wireless services provider in Latin America and the third largest in the world in terms of equity subscriber” Table 1: Company overview (source: author) * Headquartered now in Dallas, Texas, United States of America ** Incorporated in Delaware, United States of America
23 The following table shows an overview of the investments (only ‘deals’) made and used for this study.
América Móvil AT&T Verizon Deutsche Telekom Telefónica Vodafone Deals Found 24 21 6 6 64 28 Deals Used 18 16 5 6 19 15 Table 2: Overview of investments (deals) made and used (source: author)
To get a complete view of the chosen cases secondary data was used. Supporting newspaper articles for the deals were searched for in the Financial Times archives. For this the NexisLexis Academic
(2014) database was used, a database that features a powerful search engine for the archives of many newspapers. In order to find the articles the time period was set from 1st of January 2004 until 1st
January 2014 and the companies’ names were used as search terms. This resulted in a broad range of articles, which were downloaded and from which specific articles were selected based on their relevance to the investments. To ensure data quality criteria are met (i.e. that there is internal and external validity and data triangulation) also press (/news) releases of the investments were collected.
In addition the company websites were browsed (e.g. company history, relevant events) and annual accounts were collected. The following table gives an overview of this secondary data (collected and used).
Company FT Articles Company Records Press/News Company Releases Website(s) used Collected Selected Collected Selected used América Móvil 308 17 11 10 0 Yes AT&T 2396 20 9 9 15 Yes Verizon 2197 12 11 11 3 Yes Deutsche Telekom 1654 13 10 10 2 Yes Telefónica 1583 17 9 9 6 Yes Vodafone 1675 13 10 10 9 Yes Table 3: Overview of secondary data collected and used (source: author) 3.4 Data analysis
In this section the segments of the data analysis will be outlined. As previously mentioned the quantitative data was gathered and presented in a Microsoft Excel spread sheet by a group of Master students at the University of Amsterdam in 2013. This data showed the regional orientations of the
Fortune 500 companies (2012), based on these orientations companies were chosen. The orientation is used to allow some homogeneity and heterogeneity between cases, as stated above. The qualitative data analysed in this study serve as an explanation of the working proposition.
24 Analysing qualitative data has certain components: determining themes and subthemes, narrowing them down, ranking those themes and finally applying them to theoretical models (Ryan &
Bernard, 2003). Finding the themes and subthemes has been done using a technique called ‘thematic- coding’ (Ryan & Bernard, 2003). The key themes in the literature review were categorised and transferred into codes and sub codes to which working propositions were linked. These codes and sub codes were then used to label argumentation (words, sentences, paragraphs) for the working propositions (see table 4 for the codebook). Systemically categorising the key elements of qualitative data helps with explanatory research (Ryan & Bernard, 2003). The thematic coding was applied to the secondary data, the selected Financial Times publications and company records, using a computer program called Nvivo (QSR International Pty Ltd, 2014). Note that the argumentation found in the deals’ rationale (Zephyr, 2014; 2015), in press releases and those on the company websites were coded by hand.
Theme/code Sub theme/code WP Description Size 1 Tier I & II Cities with a large population size are interesting for telecom companies to locate to for Market seeking market seeking. Legislative 3b influence Tier I & II Cities that house the legislative power of their country/state are interesting for telecom companies to locate to for market seeking
Connectivity 4b Tier I cities with a high global connectivity are more interesting for telecommunication companies to locate to for market seeking
Urban Knowledge 2 All tier cities with a high urban knowledge capital are Capital interesting for telecom companies to locate to for Strategic-asset strategic-asset seeking seeking Legislative 3a Tier 1 & II cities that house the legislative power of influence their country/state are interesting for telecom companies to locate to for strategic-asset seeking
Connectivity 4a Tier I cities with a high global connectivity are more interesting for telecommunication companies to locate to for strategic-asset-seeking Efficiency seeking & Natural- - Open coding to ensure completeness of analysis resource seeking
Table 4: Codebook (source author)
As mentioned in the literature review, when looking at the city dimension of a location choice, there is a need for categorising cities. This allows for patterns across similar cities, which is important
25 when establishing general observations and conclusions (Yin, 2009). There is not (yet) ‘one absolute’ methodology for the categorising of cities. As can be recalled from the literature review, many scholars have their own hierarchy of cities, based on management-level or different flow types for example (Beaverstock et al., 1999; Beaverstock, Smith, Taylor, Walker, & Lorimer, 2000). Hymer’s
(1972) classification of three ‘Tiers’ will be the base of this study’s city categorisation. In this, every city where a deal took place will fall into one of these three ‘Tiers’; Tier I, Tier II, or Tier III. The cities classified as Tier I have been studied and accepted by many scholars (Beaverstock et al., 2000;
Goerzen et al., 2013), therefore the categorisation of cities made for this study will mostly (only) concern Tier II and Tier III cities. For these categories the different city dimensions; population size,
Legislative influence, urban knowledge capital and global connectivity will be gathered from different databases. Each dimension has one variable recorded, except for the global connectivity dimension; three variables will be used to arrive at a conclusion, based on the work of Taylor (2001). Other general variables recorded are capital city, seaport and airport presence. The next table shows an overview of the variables recorded and their influence on the rank of the city.
Dimension Variable Influence on rank Source
Population Size Population size Population > 1 million it is a Tier II city UNdata & U.S. Census Bureau Legislative Legislative If the legislative power is present in the CIA Influence power in city city it is at least a Tier II city Urban Knowledge Top University If there is a top university present it is at QS University Capital least Tier II city ranking 2012 Global Total A Tier III city does not have these Global Network Connectivity connectivity variable recorded. If a city does have service Proportional these recorded it is either a Tier II or Connectivities connectivity Tier I for 315 cities in Highest 2000 by P.J. proportional Taylor. connectivity Standard variables Capital City If a city is the capital it is a Tier II or CIA Tier I Airport Tier II or Tier I cities need to have at IATA Presence least an airport or seaport. Tier III cities Seaport need neither, but may have a seaport IAPH Presence Table 5: Explanation of City ranking (source: author)
The cities were a deal took place were all categorised based on the variables and their influence on rank, as shown in the table. This was not done separate of each other; all variables were taken into
26 account when assigning a city to a Tier. The variables have been selected based on their dimension (as outlined in the literature review). The population size is a good indicator of the (potential) consumer base present in that city, Tier I cities usually have a large population, followed by Tier II and Tier III cities. For this study the city population was measured using only the city population and not the metropolitan area. This was done because the sources use different criteria in determining a metropolitan area and because some metropolitan areas cover multiple cities, causing potential analytical problems. Legislative power in a city is a good indication as to the influence a city has on the nation, the seat of government will always be located in a Tier I or Tier II city. One of the best ways to measure Urban Knowledge Capital is to look at top universities; much research will be done in these cities and highly knowledgeable spin-offs and start-ups will often locate in the vicinity of the university. This study has chosen the QS University ranking as it also includes many top universities in Latin America as opposed to the Times Higher Education ranking or the Shanghai ranking. Cities with top universities will at least be a Tier II city. The world connectivity variables will measure the degree of (global) connectivity, the higher the degree the more connected the city is in the world city network (Taylor, 2001). Capital presence is a good indicator of institutions and other MNEs present in the city, note that this is also often the case for cities that house the legislative power but are not the capital (e.g. The Hague in The Netherlands). The standard variables airport and seaport presence are good indications for a Tier I and Tier II city, however for the telecommunications industry this is less important, due to the service related nature of the industry.
4. Within-case Analysis In this chapter the within-case analyses of América Móvil, AT&T & Verizon (North America) and
Deutsche Telekom, Telefónica & Vodafone (Europe) will be presented. These firms will be analysed independently of each other. In the discussion chapter that follows, these firms will be compared to one and other, the so-called cross-case analysis, before the conclusions of the study are presented.
4.1 América Móvil All the investments América Móvil made, during the time studied period, that had a market-seeking motive were done in either tier I or tier II cities. Interesting enough these were all cities that house the
27 legislative power of the respective countries (and, with exception of The Hague, are also national capitals). There was no evidence found for specific motives to enter a certain city. However, the data points in the direction that the acquired companies all served as a means to reach a new market in a nation or establish a greater market share in the nation of the city. Since telecommunications used to be a sector that was nationally monopolised (Bartle, 1999) it makes sense that current providers are mostly located in the city that seats the nation’s government, making locating to such cities an industry specific strategy (Rugman & Verbeke, 2005). Apart from Santiago, Chile’s capital, América Móvil only invested in one other Tier I city due to Market seeking motives, namely its hometown Mexico
City. The interesting aspect here is that all these investments (four in total) served the purpose of consolidating its position as largest telecommunications provider in the Americas, the global connectivity of Mexico City can accommodate this.
The two investments made by América Móvil that had a strategic-asset seeking motive were both acquisitions of companies that were located in Tier I cities, namely Miami, FL, USA and Mexico
City, Mexico. Both cities show high urban knowledge capital and are considered connected global cities. The businesses acquired are both service-oriented firms that have intangible FSAs easily transferable to América Móvil. These knowledge exchanges within a city are often associated with global (Tier I) cities (Storper & Venables, 2004) and are one of the reasons behind strategic-asset seeking. Furthermore the global connectivity of these cities enables companies to reach beyond the city and national borders, which in turn becomes a strategic-asset. This is also evident in the acquired firm in Miami, that also operates outside of its region; namely in Latin America. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the deals of América
Móvil, this was expected due to the nature of the industry (also see ‘section 2.2 location choice’ of this study).
When looking at América Móvil’s investments through a regional lens, the bi-regional orientation of the firm jumps out. One-third of its investments were made in its home region, while two-thirds took place in South America. All of these market-seeking investments were done in tier II cities (and one in a Tier I city) that house the national government, showing once more the importance
28 Target companies Year City and Region Tier Motive Evidence Enitel 2004 Managua, Tier II Market -"Through this transaction América Móvil gained control of the company and Nicaragua, increased its overall ownership interest in it to 99.03%." – Company Website South America -“This firm is the sole provider of fixed line services in Nicaragua, with nearly 200 thousand fixed lines. It also provides wireless services to approximately 120 thousand subscribers” – Company Website Comcel 2004 Bogota, Tier II Market -Aquisition increased to 96.1% - Deal Type Columbia, -“This acquisition will allow América Móvil to complete nationwide South America coverage in Colombia and consolidate its presence in that country” – Company Website CTE 2004 San Salvador, Tier II Market -"We continued to acquire minority participations in the company, bringing El Salvador up our stake to 95.2% at the end of 2004. CTE provides fixed, mobile and South America other telecommunications services throughout El Salvador." – Company Website Hutchison 2005 Asuncion, Tier II Market -"To acquire its operator in the Republic of Paraguay. The company offers Paruguay, wireless and value-added services throughout the country" – Company South America Website Smartcom 2005 Santiago, Tier I Market -"This month América Móvil bought the Chilean operator Smartcom … All Chile, three [aquisitions] were new markets for América Móvil" – FT August 14, South America 2005 TIM Perú 2005 Lima, Tier II Market -"América Móvil.. has intensified its battle with Spain's Telefónica in the Peru, region by buying TIM Peru … … All three [aquisitions] were new markets South America for América Móvil"- FT August 14, 2005 Verizon Dominicana 2006 Santo Domingo, Tier II Market -“An agreement was reached with Verizon Communications to acquire its Domican Republic, ownership interests in Verizon Dominicana (100%)” – Company Website South America -"We are also providing for the control of the three companies by well- regarded, highly qualified operators with significant operations in the region." said Mr Ivan Seidenberg, the CEO of Verizon." - Deal Rationale America Telecom 2007 Mexico City, Tier I Strategic & -"The acquisition, which analysts say will lead to significant synergies, Telmex 2010 Mexico, Market comes as Mr Slim seeks to extend his telecommunications empire throughout Carso 2011 North America the Americas" "At the same time, América Móvil would consolidate its Telefonos 2011 position as the largest telecommunications provider in the Americas" – FT May 10, 2010 TELPRI 2007 San Juan, Tier II Market -“We completed the acquisition of Telecomunicaciones de Puerto Rico, Puerto Rico having purchased 100% of the equity of the company.” = Company Website South America -"We are also providing for the control of the three companies by well- regarded, highly qualified operators with significant operations in the region." said Mr Ivan Seidenberg, the CEO of Verizon." - Deal Rationale Table 6: América Móvil’s investments – 1 of 2 (source: Author) Note: all deals made by América Móvil were acquisitions
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Target companies Year City and Region Tier Motive Evidence
Oceanic Digital 2007 Kingston, Tier II Market -"This operation will allow Americ Movil SA to expand its presence in the Jamaica, Caribbean." - Deal Rationale South America Cablenet 2009 Managua, Tier I Market -"The initiative is in line with América Móvil's rebranding strategy aimed at Nicaragua, establishing the Claro brand in all of its Central American operations" – FT South America May 21, 2009 Digicel Honduras 2011 Tegucigalpa, Tier II Market -"We acquired a 100% ownership interest in Digicel Honduras, a company Honduras, that provides wireless telecommunications services in Honduras. “ – South America Company Website DLA 2012 Miami, FL Tier I Strategic -"América Móvil expects to expand its streaming services in Latin America USA [with DLC's assets]" - Deal Rationale North America -“We had entered into an agreement with Claxson Interactive Group to acquire 100% of DLA, Inc., which is the leading corporation in the development, integration and delivery of entertainment products made for digital distribution in Latam” – Company Website CMI 2013 Mexico City, Tier I Strategic -"The acquisition is in line with América Móvil's strategy, as CMI has many Mexico assets which can be used to advertise products, and América Móvil has a North America number of products which it is aiming to sell in the market, " - Company Website KPN 2013 The Hague, Tier II Market -"It will allow us to maintain our leading market positions in The Netherlands The Netherlands, and supports the next phase of our Challenger strategy in Germany and Europe Belgium" Deal Rationale - "It's another sign that diversifying outside of Mexico is of paramount importance for Carlos Slim," – FT - "Any additional investments have to be made outside of the region [Latin America]." FT Table 6: América Móvil’s investments – continued 2 of 2 (source author) Note: all deals made by América Móvil were acquisitions
30 of capitals (and parliament cities) for a telecommunication company when gaining and stabilising its position in a region. South America remains an understudied region in the regionalisation literature and was not included in the original study by Rugman and Verbeke (2004). This might put the regional orientation to a debate, however given the North American privileges of Mexico by being the only Latin American country to participate in the NAFTA it is fair to say América Móvil does indeed have a bi-regional orientation. When investing in its home-region the main motive was strategic-asset seeking, although in its home-region it only invested in firms with strong links to markets in the South
American region. This would indicate the fact that Mexico’s history and culture makes it’s inter- regional LoF (between regions) with South America lower than its intra-regional LoF (with-in the region). An interesting phenomenon since normally it is the other way around (Rugman & Verbeke,
2007) and it all depends on which region Mexico is classified in. Interesting to note here is that the
KPN deal that took place in The Hague, NL (in a region with a high inter-regional LoF), eventually was nullified by the Dutch foundation linked to KPN (Thomas, Sakoui, & Webber, 2013).
4.2 AT&T AT&T’s market seeking motives often ended up with acquiring companies that were located in cities that are the state capital and house the seat of the state government. It located to four of these capital cities, three Tier II cities and one Tier I city. The only Tier I city AT&T located to for market-seeking motives was Atlanta (GA, USA). What may have influenced the deal is the high degree of connectivity of Atlanta; since this deal was also a means to lead the way in integrated wireless services nationwide. The three other deals involving Tier II cities with a state capital, all have as rationale to reach a greater market than the city itself. It seems that not the legislative nature of these state capitals, but the domestic (and state) connectivity played a role. In this the Tier II cities were chosen as gateway to a greater area. This was also the case for the other four Tier II cities that were invested in for market-seeking purposes. However, in these investments the city does not seem to play an important role, but rather the companies’ assets were the main reason for acquisition. In these deals
AT&T would have acquired the companies regardless of which city type. This is also the case with the only deal made in a Tier III city; Fairfield, California. In this deal it acquired a company because of its wireless network in West Virginia, located 4187 km east of Fairfield, CA.
31 Target companies Year City in USA Tier Motive Evidence Callisma Inc. 2004 Palo Alto, CA. II Strategic - "Callisma has high skills consultants" - Deal Rationale - “A move designed to enhance its ability to deliver managed communications offerings and professional network consulting services to enterprise business customers" – News Release January 6, 2004 AT&T 2005 Bedminster, II Market - "In 2005, SBC, as AT&T Inc. was then called, bought AT&T Corp. for Dollars 16bn, subsequently corporation NJ. adopting the most famous name [and network] in the US telecoms industry" - FT June 19, 2007 - "Through its subsidiaries and affiliates, AT&T Inc. is the largest telecommunications company in the United States" – News Release November 18, 2005 Bellsouth 2006 Atlanta, GA. I Market - "The purchase of BellSouth gave AT&T exclusive control of Cingular, the largest US mobile operator corporation by number of customers." - FT June 19, 2007 - "In the Southeast, we will build on BellSouth's excellent record of serving customers and communities. And we are ready to lead the way in a new era of integrated wireless services nationwide." - News Release December 29, 2006 Wayport Inc. 2007 Austin, TX II Market - "The deal expands the AT&T's WiFi footprint to nearly 20,000 hotspots in the US and more than 80,000 locations worldwide and is designed to enable the company to better serve the growing number of subscribers and others carrying WiFi-enabled devices including smartphones" – FT November 7, 2008 - "Wi-Fi as strategic choice to become WI-Fi leader" - Deal Rationale - "The Wayport resources significantly advance AT&T's strategy for deploying consumer Wi-Fi services" – News Release November 6, 2008 Dobson 2007 Oklahoma II Market - "Dobson's purchase will give AT&T direct access to an additional 1.7m subscribers in rural areas' - FT communications City, OK June 30, 2007 corporation - "Offering our customers in markets large and small the best and broadest wireless network" - Deal Rationale - "The merger extends AT&T's coverage and services into a number of primarily rural and suburban areas" – News Release November 15, 2007 Ingenio Inc. 2007 San Francisco, I Strategic - “Ingenio’s technology will allow AT&T to expand our robust service portfolio for print, online and CA mobile advertisers, and that will further differentiate us from our competitors.” – News Release November 19, 2007 Interwise Inc. 2008 Cambridge, II Strategic -"The transaction strategically aligns Interwise's innovative IP-based conferencing and collaboration MA solution with AT&T's enterprise networking, communications and collaboration service." – News Release October 1, 2007 Table 7: AT&T’s investments – 1 of 2 (source: author) Note: all deals made by AT&T were acquisitions
32
Target companies Year City in USA Tier Motive Evidence Easterbrooke 2008 Fairfield, CA III Market -"The addition of Easterbrooke's wireless network will allow AT&T to deliver broader wireless cellular coverage to customers in West Virginia, including Easterbrooke's more than 19,000 subscribers." – corporation's News Release January 2, 2008 assets Edge wireless llc 2008 Bend, OR II Strategic -"The addition of Edge's wireless network will allow AT&T to deliver broader wireless coverage to customers in the Northwest, including Edge's existing subscribers. " – News Release April 18, 2008 Cincinnati smsa 2008 Cincinnati, II Market -"Committed to deliver in OH" - Deal Rationale lp OH Plusmo Inc. 2009 Santa Clara, III Strategic -"The acquisition of Plusmo, a leading provider of cross-platform mobile application solutions, is CA bringing to AT&T an open standards technology that will simplify mobile application development, accelerate innovation and deliver a better application experience for consumers" – News Release September 30, 2009 Verisign Inc.’s 2009 Mountain II Strategic -"The transaction aligns VeriSign’s security consulting experience in comprehensive risk assessment global security View, CA with AT&T’s suite of network-based cybersecurity services." – News Release October 1, 2009 consulting - "The experienced security consulting professionals joining AT&T as part of this transaction have an business average of eight years of experience" – News Release October 1, 2009 Centennial 2009 Wall, NJ II Market - "The combination of the two companies’ wireless networks will allow AT&T to deliver broader communications wireless coverage, including to approximately 893,000 former Centennial wireless subscribers." – corporation November 6, 2009 -"Enhances network coverage for our consumer and business customers" - Deal Rationale Verizon wireless 2010 New York I Strategic -"Complement our existing network coverage, particularly in rural areas," - deal rational Inc.’s wireless City, NY -"The transaction enhances AT&T’s wireless network coverage in primarily rural areas in 79 service assets areas across 18 states" – News Release June 22, 2010 Nextwave 2013 San Diego, II Strategic -"NextWave Wireless, Inc. NextWave holds licenses in the Wireless Communication Services (WCS) Wireless Inc. CA and Advanced Wireless Service (AWS) bands." – News Release August 2, 2012 Allied wireless 2013 Little Rock, II Market -"AT&T acquired wireless properties in six states, including spectrum licenses, network assets, retail communications AR stores and approximately 590,000 subscribers" – News Release September 20, 2013 corporation Table 7: AT&T’s investments – continued 2 of 2 (source: author) Note: all deals made by AT&T were acquisitions
33 Strategic-asset seeking is almost as important as market-seeking motives to AT&T’s strategy, with almost 45% of its deals related to this motive. It acquired twice in a Tier I city to find companies that have strategic assets, New York City and San Francisco. New York City has high urban knowledge capital, however the main reason behind the deal was to obtain the network coverage assets of 79 service areas across 18 states. Given the reasoning behind the deal it is the connectivity of New
York City, which after London is the highest globally (Taylor, 2001), that has developed these assets and motived the location choice. The deal that took place in San Francisco concerned acquiring the target company’s technology; given the high urban knowledge capital of San Francisco it has been a prime location for technology-based firms. The other deals involving strategic-asset seeking took place in tier II cities and one tier III city. Almost all the tier II cities have a high urban knowledge capital, making that dimension of most importance in these deals. Only tier II city Paolo Alto (CA,
USA) does not have this urban knowledge capital, however it neighbours to the Stanford University.
In a similar case, Santa Clara (CA, USA) (the only Tier III city in the strategic-asset seeking deals) is located in Silicon Valley; an area known for its high knowledge intensive industry (Peng, 2012). Santa
Clara and its companies can profit from this ‘local’ knowledge capital. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the deals of AT&T, this was expected due to the nature of the industry (also see ‘section 2.2 location choice’ of this study).
As can be derived from the deals, AT&T did not invest in companies outside of its home region. Moreover it only invested in its own country, making it a textbook example of a MNE with a strong home country market that is home-region orientated with a clear home country effect (Rugman
& Verbeke, 2005). AT&T’s strategy and focus is on the U.S. market, limiting their FDI. However, they are still considered an MNE as they do business (e.g. through alliances and licensing) overseas to make sure their home market is served; “Even if our customers decide to travel abroad, we have them covered. AT&T has the best worldwide coverage of any U.S. carrier” (AT&T, 2015).
4.3 Verizon In the studied time period Verizon did not make one investment with a motive that was only based on market seeking. It did however used market seeking as a sub-motive, as part of a strategic-asset
34 seeking initiative. In 2006 Verizon acquired MCI, headquartered in Dulles (VA, USA). Interestingly
Dulles is an unincorporated area, part of the Washington, DC (Tier I) metropolitan area, making it the only ‘city’ in this study not to be categorised by itself but by the city region it is part of. Such a wider region with a political-economic unit can be referred to as a global city region (Scott, 2001). The high degree of connectivity of Dulles (Washington, DC) played a role in establishing a “vast network of long-distance and business customers” (Politi, 2006).
All investments Verizon made concerned a strategic-asset seeking motive. It invested in a total of three Tier I cities and two Tier II cities. The common denominator in these deals is that the companies acquired were all located in a city that houses one or more QS Top universities (QS, 2012), meaning that these cities have a high Urban Knowledge Capital. Both Tier II cities Burlington (MA,
USA) and Westborough (MA, USA) are university towns located in the close vicinity of the greater
Boston (MA, USA) area, which is known for its top universities. Given the technological assets the acquired companies possessed, this dimension seems the driving force behind the deals. The three deals made in Atlanta, Dulles and Miami (all Tier I) were also the most expensive deals Verizon made and involved the three biggest companies in this dataset. Given the fact that these MNEs were all headquartered in Tier I cities, shows the importance of the connectivity of these cities and underlines
Hymer’s (1972) argument. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the deals of Verizon, this was expected due to the nature of the industry
(also see ‘section 2.2 location choice’ of this study).
Verizon operates in multiple regions, although almost all of its sales are in its own region. This makes its orientation home regional with a strong home country effect, similar to its rival AT&T.
When looking at its investments it is no surprise that this is the category the company falls into. All investments were made in the USA and had strategic-asset seeking as the main motive for investing.
Moreover, it seems that Verizon’s strategy is to move away from the traditional telecommunication channels and their markets (e.g. fixed-lines) towards developing new telecommunication solutions.
This transition is supported by the sale of Verizon Dominicana and its wireless assets to rivals
América Móvil and AT&T (Table, 6;7) and their acquisitions of (new) technology based firms.
35 Target Companies Year City in USA Tier Motive Evidence MCI Inc. 2006 Dulles, VA* I Strategic & “In order to enhance its ability to deliver the benefits of converged communications, Market information and entertainment across the country and around the world” – Verizon Corporate History - “Since last year, Verizon has been busy integrating its acquisition of MCI for nearly Dollars 10bn, which gave it access to a vast network of long-distance and business customers” FT March 6, 2006 Switchboard Inc. 2007 Westborough, MA II Strategic - “Consistent with our strategy of driving revenue generation across multiple platforms” – Deal Rationale - “We are excited about the additional value and quality traffic this deal brings to our portfolio and the related value proposition to our advertisers.” IDEARC Inc. News Release September 17, 2007 Terremark 2011 Miami, FL I Strategic - “Our collective vision will foster innovation, enhance business processes and dynamically Worldwide Inc. deliver business intelligence “ Deal Rationale - “[Verizon acquired] Terremark Worldwide, a leading cloud computing service provider .... It also highlighted the potential for telecoms groups to add revenue streams, offsetting the steady decline in the number of fixed lines they serve.” FT April 27, 2011 Cloudswitch Inc. 2011 Burlington, MA II Strategic - “CloudSwitch brings Verizon breakthrough software that enables enterprises to more easily and securely move applications, or workloads, between company data centers and the cloud “ Press Release August 25, 2011 - “To complement the Terremark acquisition, Verizon acquired CloudSwitch, an innovative provider of cloud software technology , in August 2011” – Verizon Corporate History Hughes Telematics 2012 Atlanta, GA I Strategic - “Verizon’s acquisition of Hughes Telematics – which specialises in fleet management, in- Inc. car services and remote diagnostics – for $612m.” – FT September 10, 2012 - “Setting Verizon on a course to accelerate growth through the delivery of advanced automotive and fleet telematics and machine-to-machine services”. – Press Release July 26, 2012 Table 8: Verizon’s investments (source: author) * Dulles, VA is an unincorporated area part of the Washington (DC) Metropolitan Area Note: all deals made by Verizon were acquisitions
36 4.4 Deutsche Telekom Out of the six investments Deutsche Telekom made, three involved looking for new markets or expanding their market share. For its core business of fixed-line and wireless connections it specifically looked for markets in Eastern Europe. It acquired two national carriers in this region, located in Tier I cities. Both cities, Budapest (Hungary) and Warsaw (Poland), are capitals and seat the national government. This is due to the liberalisation of the telecommunication industry when the state-owned companies were privatised (Bartle, 1999) and located in those cities since it is important to stay close to the decision makers of the national telecommunication infrastructure; the government.
For its other market-seeking investment Deutsche Telekom turned to Berlin (Germany), another Tier I city that seats the national government. In Eastern Europe they acquired traditional markets, while in its home country they invested in a new type of market. They acquired Strato, a webhosting firm, to become the second largest provider of webhosting products in Germany (Parker, 2011). The connectivity and to some extent the urban knowledge capital of Berlin played a role for developing such a relative new segment of the industry. However, it is the connectivity of Berlin that made
Strato’s and in turn Deutsche Telekom’s national market share in the webhosting market possible.
While seeking to invest for strategic assets, Deutsche Telekom acquired two companies and set up one joint venture. The biggest deal was made in Darmstadt (Germany), a Tier II city. Here it acquired T-online International (which was operating as a separate entity at the time) in order to incorporate their business units as its strategic business area. It would have made this deal regardless of city type. The other strategic-asset seeking acquisition and the joint venture both took place in Tier I cities. In Warsaw it acquired Carcom in order to obtain the undisputed power managerial control. Due to the legal nature and conflict of the deal, it seems no coincidence it was located in a city with the seat of government. The innovation driven joint venture BuyIn was set up in Brussels (Belgium) together with France Télécom-Orange. This Tier I city was chosen because of its great connectivity and because it houses the European Union. This allows for good communication between the firms investing in the joint venture and helps when distributing the technology across Europe. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the Deutsche
37 Target Companies Year City & Region Tier Motive Evidence T-online 2006 Darmstad, II Strategic -“The ruling could be crucial for DT in stemming the flight of clients from its old network by International AG Germany, offering internet services in parallel.” – FT June 2, 2006 Europe -“The organizational business units T-Com and T-Online form Deutsche Telekom’s strategic business area “ – Company Website Magyar Telekom 2005 Budapest, I Market -“In October 2005 the Board of Directors of Magyar Telekom proposed the merger of Magyar Tavkozlesi nyrt Hungary, Telekom Rt. And T-Mobile Hungary Rt. “ – Company Website (aka Matav) Europe -“Deutsche Telekom has been one of the most active in building an eastern [Europe] empire. It has stakes in Matav of Hungary” FT April 27, 2014 Polska Telefonia 2006 Warsaw, I Market -“Elektrim is the hotly disputed holder of 48 per cent of the shares of Polska Telefonia Cyfrowa Cyfrowa (PTC) sp Poland (PTC), Poland’s leading and extremely lucrative mobile telephone operator” – FT December 7, zoo Europe 2005 - “Earlier this month, Deutsche Telekom said it had paid Euros 600m for Elektrim’s stake in PTC.” – FT October 25, 2006 Strato AG 2011 Berlin, I Market -“This step boosts our position on the highly interesting market for hosting solutions. Strato Germany complements our activities in the hosting area perfectly” – Deal Rationale Europe - “The transaction will make Deutsche Telekom number two for webhosting products in Germany. “ Press Release November 19, 2009 -“Deutsche Telekom paid EUR275m for Strato, a provider of web-hosting products” FT May 12, 2011 Carcom Warszawa sp 2011 Warsaw, I Strategic -“Following many years of legal conflict, this agreement finally gives us the exclusive and zoo Poland, undisputed power to make decisions – and does so at attractive conditions” – Deal Rationale Europe Buyin 2011 Brussels, I Strategic -“The new joint venture will offer a more efficient sourcing organization that will lead to more Belgium, JV effective partnerships with suppliers. This will enable us to drive innovation and shape the Europe development of technology in a way that meets customers’” – Deal Rationale -“The creation of BuyIn in October 2011 was a complex, yet important strategic move in a competitive market with strong smartphone and broadband growth, declining margins, high technical challenges and a very strong and consolidated supplier base.” – Company Website -“BuyIn will start business operations next Monday as a Brussels-based procurement joint venture between Deutsche Telekom and France Télécom-Orange” – Press Release October 14, 2011 Table 9: Deutsche Telekom’s investments (source: author) NOTE: Except for the BuyIn Joint Venture (JV) all deals made by Deutsche Telekom were acquisitions
38 Telekom’s deals, this was expected due to the nature of the industry (also see ‘section 2.2 location choice’ of this study).
Although Deutsche Telekom has enough sales in other regions to be labelled as a bi-regional oriented MNE, in the time period studied it only invested in cities located in its home region. Looking only at the studied investments Deutsche Telekom can be labelled as a home region orientated MNE.
Here it is trying to build on its position throughout the whole region, by acquiring companies in
Eastern Europe and using Brussels’ connectivity as a base for its joint venture with France Télékom
Orange.
4.5 Telefónica Five investments made by Telefónica had a market seeking motive; out of these five investments three were made in a city that is the national capital and seats the national government. One was a tier II city
(Lima, Peru) the other two Tier I (Buenos Aires, Argentina & Prague, Czech Republic), in all of these investments the city was a means to reach the whole national market and having the seat of government in the same city made this possible. The other two market seeking investments took place in Tier III cities; in both cases Telefónica would have acquired the companies no matter in what cities they were located. When looking closer at these cities, there are visible characteristics that influence the location choice of those companies. However, these characteristics were not included in this study.
For example the acquisition of O2 took place in Slough (UK) a city that is located right next to
Heathrow airport, one of the busiest airports in the world and only 40 km away from downtown
London, the most connected city globally (Taylor, 2001). The other acquisition in a tier III city concerns Endemol NV, a large Dutch TV-production company, due to its core business it’s located in
Hilversum, the medial capital of the Netherlands.
A total of nine investments were made in its search for strategic assets, one in a tier II city and eight in a tier I city. Out of these eight investments it started a joint venture twice, both located in tier I cities with a high urban knowledge capital, Dublin (Ireland) and Madrid (Spain), both cities that are attractive for (technology) FDI (EY, 2015). Two other companies were acquired in Tier I cities
39 Target companies Year City & Region Tier Motive Evidence Impresora y 2004 Santiago, I Strategic - The deal tightens TPI’s control over its Chilean subsidiary and underlines its confidence in the Comercial Chile, capacity for growth and development of the Chilean directories market.- Press Release February 23, Publiguías SA South America 2006 Bellsouth Peru SA 2004 Lima, II Market - The combination of the existing operations of Telefónica Móviles Perú and BellSouth Perú, means Peru, Telefónica Móviles would have had over 2.7 million customers in Peru at the close of the third South America quarter of 2004, in a market of over 27.3 million inhabitants with an estimated penetration rate of 18%. – press relase October 28, 2014 Media networks 2004 Lima, II - - Peru, South America Movicom 2005 Buenos Aires, I Market - “Telefónica is expanding in the region, with this year’s Euros 4.8bn purchase of Bellsouth’s South Bellsouth Argentina, American mobile assets.” – FT March 4, 2004 Argentina South America - “A deal with BellSouth would give Telefónica, the biggest telecoms group in Spain and South America, 10.5m additional customers in the region” – FT March 4, 2004 MTLD Top Level 2005 Dublin, I Strategic - The issue we are trying to solve is that the average mobile user has mobile Internet access but doesn’t Domain Ireland, JV know it or doesn’t want to try it – Deal Rationale Europe Terra Networks 2005 Barcelona, I Strategic - The move by Telefónica is the latest phase in a move to streamline its organisation and concentrate SA Spain, on the core business of fixed-line – including broadband – and wireless services” – FT February 23, Europe 2005 Endemol NV 2005 Hilversum, III Market “The company has enjoyed growth in all genres and most of its territories.” – Press Release November The Netherlands, 14, 2006 Europe Ceský Telecom 2005 Prague, I Market - “Český Telecom is the leading operator in fixed and mobile services in the Czech Republic, with an AS Czech Republic, edge over its competitors thanks to being the sole integrated operator in its market” – Press Release Europe April 12, 2005 - “For Telefónica of Spain, Cesky Telecom offers the chance to add a central European hub to its expanding footprint.” – FT March 29, 2005 O2 plc. 2006 Slough, III Market - Its integration in the Telefónica group will enhance our growth profile, it will allow us to gain United Kingdom, economies of scale, it will open the group to the two largest European markets with sizeable critical Europe mass and it will balance our exposure across business and regions” – Deal Rationale -By adding O2’s assets, Telefónica should be able to raise its growth forecasts further, increasingly distancing itself from peers. It also makes Telefónica larger and generates tangible synergies, while balancing its exposure and diversifying its portfolio both by business and geographically.” – Press Release January 23, 2006 Table 10 Telefónica’s investments – 1 of 2 (source: author) NOTE: Except from the MTLD Joint Venture and the Roaming Hub Joint Venture all deals made by Telefónica were acquisitions The deals where no evidence could be found for, are not included in the analysis
40
Target companies Year City & Region Tier Motive Evidence Mach Sarl and 2008 Madrid, I Strategic - “Only a new model can effectively enable the missing number of agreements. With this initiative we Telefónica SA’s Spain, JV foresee that gap closing in the coming years, allowing full roaming coverage for all mobile customers Roaming Hub Europe around the world,’ – Press Release February 13, 2008 Joint Venture Iberbanda sa 2008 Madrid, I - - Spain, Europe Gloway Broadcast 2009 Granada, II - - Spain, Europe Brasilcel NV 2010 Amsterdam, I Strategic - “Telefónica paid 10.6 times earnings before interest, tax, depreciation and amortisation for PT’s 50 The Netherlands, per cent of Brasilcel, the jointly owned holding company that controls Vivo.” – FT November 3, 2010 Europe Vivo 2011 Sao Paulo, I Strategic - “Telefónica’s attempt to secure exclusive control of Vivo, Brazil’s largest mobile operator, forms part Participacoes SA Brasil, of broader efforts by Telefónica to strengthen its faltering position in the country” – FT May 12, 2010 South America - “Vivo leads the Brazilian mobile telephony market, a market to which Telefónica is strategically committed.” – Deal Rationale Lemontree 2012 Sao Paulo, I - - participações SA Brasil, South America Tokbox Inc. 2012 San Fransisco, I Strategic “The acquisition of TokBox, based in San Francisco, builds on Telefónica Digital’s strategy of driving CA, USA innovation in its core business of communications, with capabilities that will now extend beyond voice North America and messaging to live video.” – Press Release October 25, 2010. -‘Telefónica is all about empowering our customers through new and innovative digital services. By adding TokBox’s unique capabilities to our communications portfolio, we will allow our customers to leverage the full potential of web-based video communications in their own business models.’” – Deal Rationale Telco spa 2013 Trieste, II Strategic - “Telefónica announced that the deal is aimed at contributing to the development of Telecom Italia Italy, and exploring the best options for its financial flexibility” – Deal Rationale Europe - Telefónica wants to retain the broad shareholding structure, which allows the Spanish group a degree of influence over its Italian rival and its Brazilian operation that is a direct competitor in Latin America. – FT September 24, 2013 Tuenti 2013 Madrid, I Strategic _ “Tuenti, the Spanish-language social network bought by Telefónica in 2010, was founded in 2006 by Technologies sl Spain, a mixed team of Spaniards and foreigners in Madrid” – FT June 12, 2012 Europe -“This deal will increase Telefónica’s exposure to the innovative changes taking place on the web and to the services being sought by young people” – Press Release August 4, 2010 Table 10 Telefónica’s investments – continued 2 of 2 (source: author) NOTE: Except from the MTLD Joint Venture and the Roaming Hub Joint Venture all deals made by Telefónica were aquisitions. The deals where no evidence and motive could be found for, are not included in the analysis
41 because of their high degree of urban knowledge capital, Tokbox in San Francisco and Tuenti in
Madrid. In these four investments the main reason is acquiring/developing innovation, making cities with a high urban knowledge an excellent choice to locate to. The remaining acquisitions concerning strategic-asset seeking in Tier I cities had more in common with the global connectivity of cities. In these cases it was the high connectivity of the cities that allowed the companies to hold the assets that
Telefónica was seeking. For example in Amsterdam (The Netherlands), it acquired a holding firm that controlled Vivo, Brasil’s largest mobile operator. The only strategic investment made in a Tier II city was that of Telco in Trieste (Italy). The city does not seem to play a role in this and Telefónica would have acquired the company regardless of city. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the deals of Telefónica, this was expected due to the nature of the industry (also see ‘section 2.2 location choice’ of this study).
Region wise Telefónica’s investments are on a par with its sales orientation of a bi-regional
MNE, as explained in the previous chapter. It invested almost as equally in its home region as it did in
South America. Interesting here is the role Telefónica’s home country, Spain, plays in the history of the South American region. From the 15th century onwards Spain colonised most of the countries on this continent, bringing its language and culture to that side of the ocean. This lowers the costs associated with LoF for Spanish firms, including Telefónica. Taken this into account the South
American region could be seen as an extended home-region for Spanish firms, giving an extra dimension to the regional orientation of Telefónica.
4.6 Vodafone Vodafone has invested a total of seven times in Tier I cities and five of these had a market-seeking motive. These cities include four capitals that also seat their national government and one that is considered the cultural and economic capital of its country; Istanbul (Turkey). It seems that the connectivity imbedded in this city, which is geographically located on two continents, made it the ideal candidate for one of the largest telecommunications companies of Turkey. As mentioned the other four Tier I cities invested in for market seeking purposes are all national capitals and house the seat of the national government. This is also the case for Bucharest (Romania), a Tier II city were
42 Target Companies Year City & Region Tier Motive Evidence
Panafon sa 2004 Attica I Market - “Vodafone will own directly and indirectly a total of 98.228% of Panafon’s share and voting (Athens), capital” – News Release February 26, 2004 Greece - “This transaction is consistent with Vodafone’s stated strategy of selectively increasing its stakes Europe in existing operations, where opportunities arise for the creation of enhanced shareholder value.” – News Release December, 26, 2013 Magyarorszag 2004 Budapest, I Market -“Vodafone has been buying out minority investors to gain customers as growth slows” – deal mobil tavkozlesi Hungary, rationele Europe MTLD top level 2005 Dublin, I Strategic - The issue we are trying to solve is that the average mobile user has mobile Internet access but domain ltd Ireland, JV doesn’t know it or doesn’t want to try it – Deal Rationale Europe -This is an essential piece of the jigsaw for mobile operators seeking to increase data revenues from internet usage.” – FT March 24, 2004 Mobifon SA 2005 Bucharest, II Market - “Mobifon is one of the two big mobile phone operators in Romania, where it has almost equal Romania, market share with Orange. The Romanian operator has 4.9m customers in a country where Europe penetration levels are still below 50 per cent” – FT March 15, 2005 -“The principal benefits to Vodafone Group are:1) Expansion of its controlled footprint into two attractive European markets adjacent to existing Vodafone Group markets. 2) Combined population of around 32 million. 3) Strong growth economies” – News Release April 15, 2005 VenFin ltd 2006 Stellenbosch, II Strategic “VenFin’s principal asset is a 15% stake in Vodacom.” – News Release December 3, 2005 South Africa Europe Telsim Mobil 2006 Istanbul, I Market - “Turkish market represents a major growth opportunity. Our extensive operating experience and telekomunikasyon Turkey, unique set of products and services positions us to compete effectively in such a youthful market” – hizmetleri AS Europe Deal Rationale Hutchison Essar 2007 New Delhi, I Market - “India is destined to become one of the largest and most important mobile markets in the world Telecom ltd India, and this acquisition will enable our shareholders to benefit from our increased investment in this Asia-Pacific market.” – Deal Rationale -The world’s biggest mobile phone group by revenue told investors last May that it wanted to increase its presence in emerging markets because of deteriorating growth in its flagship European businesses.” – FT February 13, 2007 Allmobility 2007 Rattinge, III - - Germany, Europe Table 11 Vodafone’s invesments – 1 of 2 (source: author) Note: Except from the MTLD Joint Venture all deals made by Vodafone were aquisitions The deals where no evidence and motive could be found for, are not included in the analysis
43
Target Companies Year City & Region Tier Motive Evidence
Tele2 Italia spa 2007 Milan, I Strategic - “This acquisition is consistent with our strategy of meeting our customers total communications Italy, needs” – Deals rationale Europe -Arun Sarin, Vodafone chief executive, said: “It will generate substantial time to market benefits in Italy and Spain, where low broadband penetration and the market structure make ownership of fixed broadband assets attractive. – FT October 7, 2007 BroadNet Czech AS 2008 Prague, I Market -“The purchase will enable Vodafone to expand its operations into the Czech corporate, fixed- Czech Republic, mobile arena.” – News Release September 4, 2008 Europe Polkomtel SA 2008 Warsaw, I Market - “The UK company is interested in securing control of Polkomtel as part of efforts to expand its Poland, presence in emerging markets.” – FT August 15, 2008 Europe -“The acquisition increases Vodafone’s stake in Polkomtel from 19.6% to 24.4%, enhancing its exposure to the attractive Polish market” – News Release January 18, 2009 Central Telecom 2009 Newbury, III - - United Kingdom, Europe Vodacom group 2009 Midrand, III Market -“Even strong businesses such as Vodacom, South Africa’s largest mobile operator, which (pty) ltd South Africa, Vodafone secured control of this week in a £1.4bn deal,” – FT May 19, 2009 Africa -“Vodafone wants to use Vodacom as a hub for an expanded portfolio of African businesses.” - FT September 28, 2008 - “The principal benefits to Vodafone of the transaction are: 1) Delivers operational control of Vodacom Group, an attractive asset 2) The leading mobile network operator in South Africa, with a market share of 55% 3) A portfolio of growing operations: the number one operator in Tanzania, Lesotho and the Democratic Republic of Congo and the number two operator in Mozambique” – News Release December 5, 2008 TNT Expense 2010 Sandy Hook, III Strategic - “TnT Expense Management is a leading services provider of TEM … Its managed telecoms Management llc CT, USA, expense service, based on expert analysis as well as automated bill processing, will be a strong North America addition to Vodafone Global Enterprise’s existing services team.” – News Release October 8, 2010 Invitation Digital 2012 Bristol, II Strategic - “We look forward to working more closely with Vouchercloud in future as m-commerce services ltd United Kingdom, become ever more central to consumers’ daily lives” – News Release June 6, 2012 Europe Table 11 Vodafone’s invesments – continued 2 of 2 (source: author) Note: Except from the MTLD Joint Venture all deals made by Vodafone were aquisitions. The deals where no evidence and motive could be found for, are not included in the analysis
44 Mobifon was located when Vodafone acquired it in 2005. The Vodacom deal in 2009 is the only market seeking deal that took place in a tier III city, Midrand (South Africa). Although this city does not house the seat of government it is part of the Johannesburg metropolitan area, the country’s economic capital, and is only 30 km away from the executive capital Pretoria.
For its strategic-asset seeking motivated investments, Vodafone located to two cities because of their high urban knowledge capital, to one city because of its connectivity and it acquired two companies regardless of the city they were located in. The urban knowledge capital of Dublin (Tier I) causes a nurturing environment to (technological) start-ups, hence Vodafone and its partners choose this city as the location for their joint venture (also see section 4.5). Bristol’s (UK, Tier II) urban knowledge capital seemed to have ensured for the reasoning behind the success of the acquired company in that city. The connectivity of Milan, a tier I city in Italy and the country’s main financial hub, ensured that by acquiring Tele2 Italy, Vodafone could generate substantial time to market benefits in Italy and Spain (Terazono, 2007). The last two investments, in Stellenbosch (South Africa,
Tier II) it acquired VenFin and in Sandy Hook (CT, USA, Tier III) TNT management, both were done regardless of the city. The only reason for acquiring VenFin in Stellenbosch was its stake in another company (Vodacom). As TNT Management has offices all over the world, it is just pure coincidence its headquarters were still located in a tier III city. The other two types of FDI motives, efficiency and natural resource seeking, were not present in the deals of Vodafone, this was expected due to the nature of the industry (also see ‘section 2.2 location choice’ of this study).
Although Vodafone focused mainly on its home-region when investing, it also invested into other regions. Just as with Telefónica, the invested countries (India and South Africa) are ex-colonies,
India still having a legislative infrastructure of a British nature. Given that these deals are some of the biggest deals studied shows Vodafone’s investing orientation is not just on it’s home-region but in others as well, restating its orientation based on sales as being bi-regional.
5. Discussion In this chapter all six cases will be compared with each other to determine if any patterns emerge, this will be done in a similar fashion as the within case analysis. In the two following paragraphs the
45 motives of all the investments will be compared across the cases, then the regional orientation as derived from the case analyses will be discussed to conclude with the influence on the working propositions. The discussion part of this study will be incorporated within these segments, in order to move to the next chapter and conclude this study.
None of the sampled companies have invested in cities for market seeking motives concerning city population, even though the cities, especially the Tier I cities, have a large (potential) customer base. From the available data no clear conclusion can be formed for why this is the case, but one explanation could be that the network and spectrums that are used for communicating tend to be organised and spread out over large areas, typically national, as suppose to just limited to cities. Also, installing new antennas (that are typically placed more in urban areas) are not registered as investments in the Zephyr database or communicated in the company records. However, what can been seen in all cases, when searching for a market in a foreign country almost always a company was targeted in a city that is the seat of the government. Only the American firms AT&T and Verizon did not use this dimension of a city when looking for new markets, but this can be explained by the absence of investments outside the USA for these firms. The majority of the other companies’ investments all used this dimension as a rationale. The explanation for this lies in the history of the industry; telecommunications used to be a sector that was nationally monopolised by the government
(Bartle, 1999). The state-owned telecommunication companies were located where the government was located. Another added value to this dimension is when investing in foreign countries being close to the legislative power will increase your political capital (Yoffie & Bergenstein, 1985) and help overcome costs associated with liability of foreignness (Zaheer, 1995). An interesting note here is that although this reasoning is seen in all cases, from the data none of the MNEs seem to have started a greenfield operation (in those legislative cities). Overall only five cities (all Tier I) were targeted when seeking markets motived by a city’s connectivity, only Telefónica did not invest with such rationale.
With these investments it was not the city itself but the hub and its connections (both domestic and international) it represented that drove the MNEs to the companies located in these cities. This can be explained with the nature of the industry as that of being a network-industry (Bartle, 1999).
46 América Móvil AT&T Verizon Deutsche Telekom Telefónica Vodafone SA NA RoW NA RoW NA RoW EU RoW EU SA RoW EU AF RoW Motives for investing City population ------11 1 2 1 2 5 1 1x 1x 2x Tier I 1x 1x 4x 1x Legislative Tier I Tier Tier Tier I Tier I Tier I ------influence present 10x II I 1x 1x Market Tier II Tier Tier seeking II II 1 1 1 1 1 High degree of 1 x - - 1x I - 1x - 1x Tier - - - - 1x - - connectivity Tier I Tier I Tier I 1 1 6 5 4 2 1 1x 1x 1x Tier I 3x 4x 1x 1x High Urban Tier I Tier 4x Tier II Tier I Tier I Tier I Tier ------Knowledge Capital I 1x Tier 2x II III Tier Strategic- II asset Legislative 1 ------seeking influence 1x Tier I 1 1 1 1 1 2 1 1 1 - 1x 1x 1x Tier I 1x 1x Tier I 4x 1x 1x 1x Connectivity - - - - - Tier I Tier Tier I Tier I Tier I Tier I Tier I I Efficiency & Natural resource ------seeking Bi-Regional Home-regional Home- Home-regional Bi-regional Bi-regional regional However if labelled as Invested only in Based on sales it is However only invested Investing not only in South-America (lower USA giving it a Also strong bi-regional. in one other region own region but also LoF), then it would be home region home-country However it strategy with same/similar in other regions. Regional Orientation based on considered home orientation with effects. Even of staying strong in language and culture. Especially old investments (2004-2013) regional. strong home sold its assets Europe has shifted colonies. country effects. in South the focus. America to rival América Móvil. Table 12: Cross-Case overview Key to the cells: Categorized per firm and region the bold number is the amount of investments, subdivided by Tier type. Abbreviations: Africa (AF), Europe (EU), North America (NA), Rest of the World (RoW) and South America (SA) 47 When acquiring technology or collaborating in a technological joint venture (strategic-asset seeking), an obvious pattern emerges suggesting these investments were made in cities with a high urban knowledge capital. With exception to Deutsche Telekom, all MNEs used this city dimension for strategic-asset seeking. Internationally these high urban knowledge capital cities are typically Tier I cities. However, in the USA there are also many university cities (tier II) that are included in the investments, as well as the cluster of cities (tier II & III) in California dubbed ‘Silicon Valley’, which comes as no surprise given the reputation of this area (Peng, 2012). One of the reasons that these smaller cities are able to compete with Tier I cities is the use of relative new communication tools such as the Internet (Townsend, 2001). The move to a city that houses the government was almost never a rationale behind strategic-asset seeking, only Deutsche Telekom invested once in Warsaw to settle a judicial dispute in Poland. It seems that this characteristic of a city is mostly important when initially investing in a country to reach the market (market seeking) and the gained political capital becomes an asset not specifically searched for. The investments with a connectivity rationale only targeted Tier I cities, for both strategic-asset and market seeking FDI motives. This indicates that the connectivity dimension is predominantly associated with global cities; all of the sampled firms have invested with this rationale. An industry specific pattern that emerges is the use of the connectivity of the acquired companies and their cities as a means to control companies and markets in other countries and regions.
This confirms that this type of activity takes place in global cities (Tier I) (Hymer, 1972).
Interestingly most firms’ investments showed a majority of investments in their own home region. Only the two MNEs from Spanish speaking countries invested significantly in another region; namely South America. This understudied region in the regionalisation theory (Rugman & Verbeke,
2004) does share a culture and language with the home countries of the two MNEs, making the costs associated with inter-regional LoF lower and investments less risky (Zaheer, 1995). Another interesting observation within the regional orientation of the selected MNEs is the change from a bi- regional orientation to that of a home region orientation (Deutsche Telekom). Where sales are all well distributed over different regions the investments were only done in Deutsche Telekom’s home- region, there is no clear explanation for this, but the timing of internationalisation seems to play a role.
AT&T and Verizon reinstate their reputation of a home region MNE and with only investments in
48 their home country add a strong home country effect to that orientation. Vodafone is investing mainly in its own region, but is also trying to gain control of the markets in other regions. Interestingly these investments are in countries that are ex-colonies (India still uses the same type of legislative decision making as the United Kingdom, possibly lowering LoF).
Working Proposition Description Supported? WP 1 Tier I & II Cities with a large population size are interesting Not supported for telecom companies to locate to for market seeking. WP 2 All tier cities with a high urban knowledge capital are Supported interesting for telecom companies to locate to for strategic- asset seeking WP 3a Tier 1 & II cities that house the legislative power of their Not supported country/state are interesting for telecom companies to locate to for strategic-asset seeking WP 3b Tier I & II cities that house the legislative power of their Supported country/state are interesting for telecom companies to locate to for market seeking WP 4a Tier I cities with a high global connectivity are more Semi- interesting for telecommunication companies to locate to for supported strategic-asset-seeking WP 4b Tier I cities with a high global connectivity are more Semi- interesting for telecommunication companies to locate to for supported market seeking Table 13 Influence of analysis on working propositions
As found throughout the cross-case analysis and discussion not all links based on the literature review could be found. Hence not all working propositions were supported. Only one working proposition could be fully supported (WP2). High urban knowledge capital was the most frequently used rationale for strategic-asset seeking FDI motives. The study also showed that this could be in any of the Tier cities. The cases showed that the legislative influence as rationale behind a market-seeking motive is present when investing abroad, the link with legislative power in state capitals in the USA is not present, making WP3b supported to the extent of national capitals. For WP4a and WP4b some evidence was found to support these propositions, however the amount of investments that used this type of reasoning is too little to support it fully. Both WP1 and WP3a are not supported due to complete lack of evidence and it is fair to say that these types of rationales are not (yet) present in the telecommunication sector. The reason behind rejecting WP1 could be that the network and spectrums that are used for communicating tend to be organised and spread out over large areas (especially national). WP3a is probably not supported, as the political capital is already gained when looking to such a city when market seeking.
49 6. Conclusion Rugman and Verbeke (2004) have indicated that the orientations of MNEs are not global, but are mainly regional. Most MNEs are only orientated towards their home region and sometimes one other region (bi-regional), shedding new light on location choice. In the location choice theory Dunning
(1998) argues that the motives for investing abroad could be supported by the characteristics of the host location; here the country-level of analysis is most commonly used.
This study confirms that the orientations of most MNEs are regional by showing that most telecommunication firms are home-region or bi-regional oriented. From this regional level of analysis the study narrowed down the location choice from a country level to that of a city level. In the analysis the effect of cities on the location choice of telecommunication MNEs was measured by looking at different city dimensions. This paper followed the (global) city theory based on the pioneering work of
Hymer (1972) who categorised cities in three Tiers. With the existing global city literature
(Beaverstock et al., 2000; Beaverstock et al., 1999; Sassen, 2005) and certain dimensions of cities a more complete categorisation was created. This was then used to study the rationale behind the (FDI) motives in location choice of telecommunication MNEs.
The analysis showed that for market-seeking motives the cities that house the national legislative power are targeted in order to reach an entire country. The rationale behind these motives is to increase the political capital (Yoffie & Bergenstein, 1985) in order to lower the costs associated with LoF (Zaheer, 1995). When an investment had a strategic-asset motive (technological or innovative in nature) companies in cities that have high urban capital were targeted. These are the places where new technologies emerge. There is limited support for both motives when the global connectivity of a city was the reason for location choice. In these cases it only concerned global Tier I cities, as suggested by the literature (Beaverstock et al., 2000; Goerzen et al., 2013). To conclude, the city-level of analysis is helpful, however it should be used in combination with the country-level and region-level of analysis. This is demonstrated by the selected cases, where national (and regional) markets are the main motive for location choice and cities with specific characteristics are targeted to reach these markets.
50 6.1 Limitations and suggestion for future research This study has provided some good insights to the city-level analysis of MNEs’ location choice.
However, there are some limitations and lessons to be learned from this study. Firstly, the studied time period was too restricted, given that the liberalization of the telecommunication industry already started in the 1980’s (Bartle, 1999). This can be overcome by studying multiple MNEs from multiple industries over a longer period of time. The second limitation is the fact that the sample of companies studied was too small and only from the telecommunication industry, making a generalisation for all
MNEs difficult, although generalising to theory was possible. However, it does give some insight to the location choice for companies of a similar nature. Although there was data triangulation, by accessing different data sources, the reasons for choosing a specific city were not clearly evident.
Future studies should try to include more primary data from the decision-makers within the firm, e.g. conducting interviews and questionnaires aimed specifically at the role of cities.
The absence of an accepted methodology for the categorisation of cities creates inconsistence, giving each study its own classification of cites. Although this paper combined different methodology and came to a classification that adds to the current theory, there is still a need for a universally accepted methodology. Future research should focus on integrating all the relevant city dimensions into a unified methodology.
6.2 Scientific relevance and managerial implications
This study has enriched the existing International Business literature by showing that cities are an important level of analysis within location choice. It shows that not only country-specific-assets are of importance to an MNE when choosing a location, but also city-specific-assets. Furthermore, it has underlined the argument that most MNEs are home- or bi-regional oriented (Rugman & Verbeke,
2004).
Top management of MNEs should be aware of the important role cities can play in their corporate strategies. Lower level decision makers in MNEs (e.g. subsidiary managers) and cities (e.g. mayors) can learn from this study that the (unique) characteristics of each city should not be overlooked, but used as an advantage to both the MNE and the city.
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57 8. Appendices
Appendix 1. Sources of city characteristics ...... 58 Appendix 2. Categorisation of cities ...... 59 Table 14: Tier I cities ...... 59 Table 15: Tier II cities ...... 60 Table 16: Tier III cities ...... 62
Appendix 1. Sources of city characteristics
Population: Undata; City population by gender, city and city type accessed via http://data.un.org/Data.aspx?d=POP&f=tableCode%3A240 on Jun 8, 2015
United States Census Bureau; Population Estimates accessed via http://www.census.gov/popest/data/index.html on Jun 8, 2015
Capital/Legislative power CIA; The World Factbook accessed via https://www.cia.gov/library/publications/the-world-factbook/geos/wi.html on Jun 9, 2015
University presence (QS Ranking 2012) QS; QS World Universities Rankings - 2012 accessed via http://www.topuniversities.com/university-rankings/world-university- rankings/2012 on Jun 9, 2015
Connectivities: Global Network Service Connectivities for 315 Cities in 2000 by P.J. Taylor accessed via http://www.lboro.ac.uk/gawc/datasets/da12.html on Jun 9, 2015 based on: Taylor, P. J. (2001). Specification of the world city network. Geographical analysis, 33(2), 181-194.
Airport: IATA; Airports accessed via http://www.iata.org/pages/airports.aspx on Jun 9, 2015
Seaport: IAPH; International Association of Ports and Harbor accessed via http://www.iaphworldports.org/ on Jun 9, 2015
58 Appendix 2. Categorisation of Cities City Region Population Seat of QS (2012) Connectivity Prop. Prop. Capital Airport Seaport Government university Total Connect. Highest (country/ (country/state) present Connect state) New York City, North America 8,406,000 No Yes 61859 0.015 0.976 No Yes Yes NY, USA Milan, IT Europe 1,251,000 No Yes 38238 0.009 0.604 No Yes No Madrid, ES Europe 3,234,000 Yes Yes 37663 0.009 0.594 Yes Yes No Amsterdam, NL Europe 779,808 No Yes 37396 0.009 0.590 Yes Yes Yes Brussels, BE Europe 177,307 Yes Yes 35303 0.009 0.557 Yes Yes No Sao Paulo, BR South America 11,152,968 No Yes 34277 0.008 0.541 No Yes No San Francisco CA, North America 837,442 No Yes 32151 0.008 0.507 No Yes Yes USA Mexico City, MX North America 19,802,161 Yes Yes 30785 0.008 0.486 Yes Yes No Buenos Aires, AR South America 2,965,000 Yes Yes 30190 0.007 0.477 Yes Yes Yes Miami, FL, USA North America 413,892 No Yes 29332 0.007 0.463 No Yes Yes Prague, CZ Europe 1,247,000 Yes Yes 27475 0.007 0.434 Yes Yes No Dublin, IE Europe 527,612 Yes Yes 27226 0.007 0.430 Yes Yes Yes Barcelona, ES Europe 1,621,000 No Yes 27035 0.007 0.427 No Yes Yes Atlanta, GA, USA North America 443,775 Yes Yes 27034 0.007 0.427 Yes Yes No Istanbul, TR Europe 14,380,000 No Yes 26641 0.007 0.421 No Yes Yes Dulles, VA*, USA North America * Yes* Yes* 26504* 0.007* 0.418* Yes* Yes* No Warsaw, PL Europe 1,711,000 Yes Yes 26396 0.006 0.417 Yes Yes No Budapest, HU Europe 1,732,000 Yes Yes 26014 0.006 0.411 Yes Yes No Berlin, DE Europe 3,375,000 Yes Yes 23035 0.006 0.364 Yes Yes No New Delhi, IN Asia 9,879,000 Yes Yes 22981 0.006 0.363 Yes Yes No Attica (Athens), GR Europe 3,828,000 Yes Yes 22890 0.006 0.361 Yes Yes Yes Santiago, CL South America 6,148,754 Yes Yes 22500 0.006 0.355 Yes Yes No Table 14: Tier I cities * Dulles, VA is an unincorporated area part of the Washington (DC) Metropolitan Area
59 City Region Population Seat of QS (2012) Connectivity Prop. Prop. Capital Airport Seaport Government university Total Connect. Highest (country/ (country/state) present Connect state) Bogota, CO South America 6,763,325 Yes No 22929 0.006 0.362 Yes Yes Yes Lima, PE South America 8,472,935 Yes Yes 16350 0.004 0.258 Yes Yes Yes Bucharest, RO Europe 1,913,000 Yes Yes 16068 0.004 0.254 Yes Yes No San Diego, CA, North America 1,307,402 No Yes 14567 0.004 0.230 No Yes No USA Bristol, UK Europe 437,500 No Yes 11311 0.003 0.179 No Yes Yes Asuncion, PY South America 513,399 Yes No 11302 0.003 0.178 Yes Yes No Cincinnatti, OH, North America 296,276 No Yes 10603 0.003 0.167 no no no USA Santo Domingo, DP South America 965,040 Yes No 10578 0.003 0.167 Yes Yes Yes San Salvador, SV South America 281,287 Yes No 10489 0.003 0.166 Yes Yes No Palo Alto, CA, USA North America 66,642 no No 9078 0.002 0.143 no Yes no Kingston, JM South America 937,700 Yes No 8777 0.002 0.139 Yes Yes Yes Teguciagalpa, HN South America 765,675 Yes No 8238 0.002 0.130 Yes Yes No The Hague, NL Europe 889,237 Yes No 6703 0.002 0.106 No Yes Yes Managua, NI South America 1,029,000 Yes No 6339 0.002 0.100 Yes Yes Yes Trieste, IT Europe 201,481 No Yes 2422 0.001 0.038 No Yes Yes San Juan, PR South America 382,299 Yes Yes - - - Yes Yes Yes Stellenbosch, ZA Africa 77,476 No Yes - - - No no no Darmstadt, DE Europe 147,925 No Yes - - - No no no Hilversum, NL Europe 85,000 No No - - - No No no Granada, ES Europe 239,017 No Yes - - - No Yes no Bedminster, NJ, North America 8,302 No No - - - No Yes No USA Oklahoma City, North America 610,613 Yes Yes - - - Yes Yes No OK, USA Wall, NJ, USA North America 25,261 No No - - - No Yes No Table 15: Tier II cities – 1 of 2
60 City Region Population Seat of QS (2012) Connectivity Prop. Prop. Capital Airport Seaport Government university Total Connect. Highest (country/ (country/state) present Connect state) Little Rock, AR, North America 197,357 Yes Yes - - - Yes Yes No USA Austin, TX, USA North America 885,400 Yes Yes - - - Yes Yes No Cambridge, MA, North America 107,289 No Yes - - - No No No USA Bend, OR, USA North America 81,236 No Yes - - - No Yes No Mountain View, North America 74,066 No Yes - - - No No No CA, USA Westborough, MA, North America 18,272 No Yes - - - No No No USA Burlington, MA, North America 42,284 No Yes - - - No No No USA Table 15: Tier II cities continued 2 of 2
City Region Population Seat of QS (2012) Connectivity Prop. Prop. Capital Airport Seaport Government university Total Connect. Highest (country/ (country/state) present Connect state) Midrand, ZA Africa 87,387 No No - - - No No No Slough, UK Europe 122,000 No No - - - No No No Newbury, UK Europe 153,822 No No - - - No No No Rattinge, DE Europe 91,088 No No - - - No No No Fairfield, CA, USA North America 109,320 No No - - - No No No Santa Clara, CA, North America 120,245 No No - - - No No No USA Sandy Hook, CT, North America 11,306 No No - - - No No No USA Table 16 : Tier III cities
61