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