Factor conditions and firm resources implications on location attractiveness: A critical assessment and application in shared services industry

Abstract

This paper presents an integrated analytical framework by critically synthesizing the Porter-Dunning Diamond and the Resource-Based View (RBV) to evaluate the attractiveness of locations for multinational enterprises (MNEs). The framework was applied to Malaysian shared services firms to explore the interplay between advanced factor conditions and a firm’s strategy, resources, and capabilities – key drivers of competitive advantage influencing location choices. The study includes 15 interviews and an online survey with 232 shared services firms in Malaysia. The findings suggest that the integrated framework provides deeper insights by combining factor conditions with a firm’s unique resources to better understand location selection. Specifically, firms prioritize host-country factor conditions that align with their strategic needs and resource requirements to build competitive advantages. Innovation-driven firms, in particular, emphasize human capital and R&D capabilities when choosing locations. However, the growing influence of digital technology is reducing the dependence on specific host-country factors, facilitating cross-collaboration. This study contributes to theoretical advancements by filling gaps in existing literature and offers practical and policy implications for leveraging context-specific factor conditions in alignment with strategic objectives.