Dany Bahar, 13 December 2019

A key influence on the location decisions of multinationals is thought to be the ‘knowledge–distance trade-off’ – how far apart headquarters are from foreign subsidiaries, and the impact this has on ease of communication between them on issues related to management, monitoring, coordination, troubleshooting, and so on. This column argues that it is differences in time zones as much as the transport costs related to physical distance that play an important role in this trade-off. Human interaction is vital for the transfer of tacit knowledge that underpins economic development.

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