Does location advantage matter? An analysis of FDI in Malaysia.

Multinational Corporations (MNCs) have long played important roles in Malaysia’s industrial development. Increasingly, in addition to the valued contributions of MNCs in terms of export revenue and employment, access to global markets is of paramount importance. This paper examines ‘location advantage’ in influencing inward foreign direct investment (FDI) in Malaysia. Introduced by Dunning (1979), location advantage is part of the eclectic paradigm which is a general framework for determining the extent and pattern of FDI activity. It integrates various theories of the firm, organisation and trade. Selected theoretical approaches are also reviewed in explaining the basis for FDI and MNCs’ existence. Encapsulating all theories is the ability of MNCs’ to create and sustain their competitive advantages. The study utilized several proxies to determine the case for location advantage. The findings concur with similar studies in the literature.