The environmental factors that impact on foreign subsidiaries operating in Australia

This article identifies the environmental factors that impact on established foreign subsidiaries operating in Australia. It also clarifies whether these environmental factors are the same as traditional location determinants which attract the initial foreign direct investment (FDI) into a location. This is important as embeddedness in a host location is in part dependent upon the quality of the advantages offered by the environment in which the subsidiary operates. A survey of 356 foreign MNE subsidiaries from North America, Europe and Japan, operating in Australia revealed that infrastructure, agglomeration, investment image, government support, input costs, government costs, safe environment and market size were the critical factors that impacted on their attitude to the environment in which they operated. Foreign subsidiary attitudes have public policy implications for Australian governments keen on maintaining foreign subsidiary operations in their domain. The key considerations for government are the need to keep taxes and charges low, reduce bureaucratic hurdles for business, maintain good infrastructure and provide more government support post the initial investment.