Chapter 1: Globalizing Business...................................................................................................................................3
A. Important Terminologies................................................................................................................................3
B. 2 Core Perspectives of company’s success ..............................................................................................3
C. What is Globalization? ......................................................................................................................................4
Chapter 2: Formal Institutions .....................................................................................................................................8
A. Opening Case ........................................................................................................................................................8
B. Institutions-Based View ..................................................................................................................................9
C. Understanding Institutions ......................................................................................................................... 10
D. 3 Main Formal Institutions .......................................................................................................................... 11
E. Debates ................................................................................................................................................................ 14
F. The Relationship between Good Corporate Governance and Institutions .............................. 16
G. Institutions and Political Risks .................................................................................................................. 17
H. Implications for Practice .............................................................................................................................. 18
I. Learning Outcomes (Answered) ............................................................................................................... 19
Chapter 3: Informal Institutions ............................................................................................................................... 20
A. Culture ................................................................................................................................................................. 20
B. Religion ................................................................................................................................................................ 22
C. Language ............................................................................................................................................................. 23
D. Ronen & Shenkar’s Cultural Clusters ...................................................................................................... 24
Chapter 4: Identifying and Assessing Firm Resources .................................................................................... 25
A. Opening Case ..................................................................................................................................................... 25
B. Resource-Based View .................................................................................................................................... 26
C. Assignments (Answered) ............................................................................................................................. 34
Chapter 13 - Competitive Dynamics in Entry Games ....................................................................................... 36
A. Dynamics of Competition ............................................................................................................................. 37
B. Concentrated European Market ................................................................................................................ 42
C. Framework of EU Merger Control ............................................................................................................ 44
D. Institutional Oversight & Behavioral Cartel Control ........................................................................ 48
E. International Trade Law .............................................................................................................................. 48
Chapter 14 - Global Strategies and Mergers & Acquisitions ......................................................................... 50
A. Why companies expand into Multinational Enterprises (MNEs) ................................................ 51
B. 3 Primary Growth Paths an MNE can take to expand internationally ...................................... 52
C. Building Global Strategies............................................................................................................................ 52
D. Mergers & Acquisitions ................................................................................................................................. 53
E. Institutions Governing Institutions ......................................................................................................... 59
F. Debates and Extensions in M&A Strategy ............................................................................................. 60
G. Learning Outcomes (Answered) ............................................................................................................... 61
1
,Chapter 6&11 - Modes and Theories of Internationalization ....................................................................... 62
A. Foreign Direct Investment (FDI) .............................................................................................................. 62
B. Contractual Expansion Modes ................................................................................................................... 66
C. Theories of Firm Internationalization .................................................................................................... 67
D. Assignment ........................................................................................................................................................ 71
Chapter 12&15 - Strategic Decisions on FDI and International Strategies ............................................. 73
A. Strategic Decisions on FDI ........................................................................................................................... 73
B. MNE Strategies and Structures .................................................................................................................. 76
C. Assignment ........................................................................................................................................................ 80
2
,Chapter 1: Globalizing Business
Learning Objectives
1. Explain the concept of international business (IB): GDP, GNI, etc…, understand trade and
foreign direct investment trends.
2. Identify one fundamental question in international business from two core perspectives
that provide a framework to explain the success of companies abroad: institution-based
and/or resource-based view.
3. Provide different definitions of globalization (4). (slide 22)
4. Explain 3 views on the extent of globalization - the link between globalization and
poverty reduction.
5. Explain 3 views on globalization: Friedman (flat world) vs. Florida (spiky world) vs.
Ghemawat (semi-globalization) (slide 27-29)
6. Participate in the debate on globalization/deglobalization or slowbalization with a
reasonably balanced and realistic view.
7. Discuss the factors discouraging globalization.
A. Important Terminologies
International Business: Any firm that engages in cross-border economic activities or the
general act of doing business in a foreign country.
Global Business: A broader term that encompasses both international (cross-border) activities
and domestic business activities around the world.
Multinational Enterprise (MNE): A specific type of firm that engages in Foreign Direct
Investment (FDI).
Foreign Direct Investment (FDI): The act of investing in, controlling, and managing value-
added activities in other countries. This is contrasted with portfolio investment, which involves
passive holding of foreign securities without active management control.
Gross National Product (GNP): The total value of goods and services produced by a nation’s
residents, regardless of where they are operating.
→GNP is GDP + net income from overseas investments and remittances
➢ Remittance money is a transfer of money by a foreign worker or migrant to an individual
(usually family) in their home country, which is hugely important for some developing
countries.
Gross Domestic Product (GDP): The total market value of all final goods and services produced
within a country's borders in a specific timeframe, typically one year.
Gross National Income (GNI): A measure that combines GDP with income from nonresident
sources abroad. Organizations like the World Bank now use this term to replace GNP.
Purchasing Power Parity (PPP): An adjustment to GDP to account for differences in the cost of
living between countries, showing what money can actually buy locally.
B. 2 Core Perspectives of company’s success
The Institution-Based View
Think of this as the "Rules of the Game." To succeed, a firm must navigate the environment it
operates in.
3
, • Formal Rules: Laws, regulations, and government requirements (e.g., tax laws or trade
agreements). → Chapter 2
• Informal Rules: Culture, social norms, and ethics (e.g., how business is "normally" done
in a specific country). → Chapter 3
An institution-based view suggests that the formal and informal rules of the game, known as
institutions, shed light on what is behind firms’ performance around the globe.
The Resource-Based View
Think of this as the "Player’s Skills." Even if the rules are the same for everyone, some companies
win because of what they own and do internally.
Beyond the Environment: It argues that just looking at the external environment (Institution-
based view) isn't enough to explain success. You have to look at what's happening inside the
company.
The Liability of Foreignness (LOF): This is the inherent disadvantage a foreign company faces
when entering a new country. They don't know the local "rules" as well as local firms do, and
they might have a different cultural background.
The "Primary Weapon": To beat the LOF, a foreign firm must have overwhelming internal
resources and capabilities.
➢ Example: Even though Coca-Cola or Microsoft are "foreign" in most countries, their
massive brand power, technology, and global supply chains are so strong that they more
than make up for any disadvantage of being an outsider
The Liability of Outsidership: The inherent disadvantage a firm faces when expanding into a
new geographic or product market where it lacks a presence.
It breaks down the "why" behind the struggle to compete
with established local firms:
The Root Causes (Green Boxes)
a) Distant origins: The home office is physically or
culturally far away, making communication and
understanding difficult.
b) Lack of local experience: The firm doesn't
understand the unique nuances of the specific new market.
c) Lack of nearby experience: The firm hasn't operated in similar or neighboring regions,
so it has no "stepping stone" knowledge.
The Resulting Barriers (Orange Box)
These three factors lead to a massive hurdle: a lack of familiarity (how things work), networks
(who to talk to), and legitimacy (being trusted by local customers and regulators).
The Final Impact (Red Box)
The accumulation of these issues creates the Liability of Outsidership, which often results in
higher costs and a higher risk of failure compared to local competitors.
C. What is Globalization?
Globalization doesn't have one single definition; rather, it’s a complex debate seen through
different lenses.
4
A. Important Terminologies................................................................................................................................3
B. 2 Core Perspectives of company’s success ..............................................................................................3
C. What is Globalization? ......................................................................................................................................4
Chapter 2: Formal Institutions .....................................................................................................................................8
A. Opening Case ........................................................................................................................................................8
B. Institutions-Based View ..................................................................................................................................9
C. Understanding Institutions ......................................................................................................................... 10
D. 3 Main Formal Institutions .......................................................................................................................... 11
E. Debates ................................................................................................................................................................ 14
F. The Relationship between Good Corporate Governance and Institutions .............................. 16
G. Institutions and Political Risks .................................................................................................................. 17
H. Implications for Practice .............................................................................................................................. 18
I. Learning Outcomes (Answered) ............................................................................................................... 19
Chapter 3: Informal Institutions ............................................................................................................................... 20
A. Culture ................................................................................................................................................................. 20
B. Religion ................................................................................................................................................................ 22
C. Language ............................................................................................................................................................. 23
D. Ronen & Shenkar’s Cultural Clusters ...................................................................................................... 24
Chapter 4: Identifying and Assessing Firm Resources .................................................................................... 25
A. Opening Case ..................................................................................................................................................... 25
B. Resource-Based View .................................................................................................................................... 26
C. Assignments (Answered) ............................................................................................................................. 34
Chapter 13 - Competitive Dynamics in Entry Games ....................................................................................... 36
A. Dynamics of Competition ............................................................................................................................. 37
B. Concentrated European Market ................................................................................................................ 42
C. Framework of EU Merger Control ............................................................................................................ 44
D. Institutional Oversight & Behavioral Cartel Control ........................................................................ 48
E. International Trade Law .............................................................................................................................. 48
Chapter 14 - Global Strategies and Mergers & Acquisitions ......................................................................... 50
A. Why companies expand into Multinational Enterprises (MNEs) ................................................ 51
B. 3 Primary Growth Paths an MNE can take to expand internationally ...................................... 52
C. Building Global Strategies............................................................................................................................ 52
D. Mergers & Acquisitions ................................................................................................................................. 53
E. Institutions Governing Institutions ......................................................................................................... 59
F. Debates and Extensions in M&A Strategy ............................................................................................. 60
G. Learning Outcomes (Answered) ............................................................................................................... 61
1
,Chapter 6&11 - Modes and Theories of Internationalization ....................................................................... 62
A. Foreign Direct Investment (FDI) .............................................................................................................. 62
B. Contractual Expansion Modes ................................................................................................................... 66
C. Theories of Firm Internationalization .................................................................................................... 67
D. Assignment ........................................................................................................................................................ 71
Chapter 12&15 - Strategic Decisions on FDI and International Strategies ............................................. 73
A. Strategic Decisions on FDI ........................................................................................................................... 73
B. MNE Strategies and Structures .................................................................................................................. 76
C. Assignment ........................................................................................................................................................ 80
2
,Chapter 1: Globalizing Business
Learning Objectives
1. Explain the concept of international business (IB): GDP, GNI, etc…, understand trade and
foreign direct investment trends.
2. Identify one fundamental question in international business from two core perspectives
that provide a framework to explain the success of companies abroad: institution-based
and/or resource-based view.
3. Provide different definitions of globalization (4). (slide 22)
4. Explain 3 views on the extent of globalization - the link between globalization and
poverty reduction.
5. Explain 3 views on globalization: Friedman (flat world) vs. Florida (spiky world) vs.
Ghemawat (semi-globalization) (slide 27-29)
6. Participate in the debate on globalization/deglobalization or slowbalization with a
reasonably balanced and realistic view.
7. Discuss the factors discouraging globalization.
A. Important Terminologies
International Business: Any firm that engages in cross-border economic activities or the
general act of doing business in a foreign country.
Global Business: A broader term that encompasses both international (cross-border) activities
and domestic business activities around the world.
Multinational Enterprise (MNE): A specific type of firm that engages in Foreign Direct
Investment (FDI).
Foreign Direct Investment (FDI): The act of investing in, controlling, and managing value-
added activities in other countries. This is contrasted with portfolio investment, which involves
passive holding of foreign securities without active management control.
Gross National Product (GNP): The total value of goods and services produced by a nation’s
residents, regardless of where they are operating.
→GNP is GDP + net income from overseas investments and remittances
➢ Remittance money is a transfer of money by a foreign worker or migrant to an individual
(usually family) in their home country, which is hugely important for some developing
countries.
Gross Domestic Product (GDP): The total market value of all final goods and services produced
within a country's borders in a specific timeframe, typically one year.
Gross National Income (GNI): A measure that combines GDP with income from nonresident
sources abroad. Organizations like the World Bank now use this term to replace GNP.
Purchasing Power Parity (PPP): An adjustment to GDP to account for differences in the cost of
living between countries, showing what money can actually buy locally.
B. 2 Core Perspectives of company’s success
The Institution-Based View
Think of this as the "Rules of the Game." To succeed, a firm must navigate the environment it
operates in.
3
, • Formal Rules: Laws, regulations, and government requirements (e.g., tax laws or trade
agreements). → Chapter 2
• Informal Rules: Culture, social norms, and ethics (e.g., how business is "normally" done
in a specific country). → Chapter 3
An institution-based view suggests that the formal and informal rules of the game, known as
institutions, shed light on what is behind firms’ performance around the globe.
The Resource-Based View
Think of this as the "Player’s Skills." Even if the rules are the same for everyone, some companies
win because of what they own and do internally.
Beyond the Environment: It argues that just looking at the external environment (Institution-
based view) isn't enough to explain success. You have to look at what's happening inside the
company.
The Liability of Foreignness (LOF): This is the inherent disadvantage a foreign company faces
when entering a new country. They don't know the local "rules" as well as local firms do, and
they might have a different cultural background.
The "Primary Weapon": To beat the LOF, a foreign firm must have overwhelming internal
resources and capabilities.
➢ Example: Even though Coca-Cola or Microsoft are "foreign" in most countries, their
massive brand power, technology, and global supply chains are so strong that they more
than make up for any disadvantage of being an outsider
The Liability of Outsidership: The inherent disadvantage a firm faces when expanding into a
new geographic or product market where it lacks a presence.
It breaks down the "why" behind the struggle to compete
with established local firms:
The Root Causes (Green Boxes)
a) Distant origins: The home office is physically or
culturally far away, making communication and
understanding difficult.
b) Lack of local experience: The firm doesn't
understand the unique nuances of the specific new market.
c) Lack of nearby experience: The firm hasn't operated in similar or neighboring regions,
so it has no "stepping stone" knowledge.
The Resulting Barriers (Orange Box)
These three factors lead to a massive hurdle: a lack of familiarity (how things work), networks
(who to talk to), and legitimacy (being trusted by local customers and regulators).
The Final Impact (Red Box)
The accumulation of these issues creates the Liability of Outsidership, which often results in
higher costs and a higher risk of failure compared to local competitors.
C. What is Globalization?
Globalization doesn't have one single definition; rather, it’s a complex debate seen through
different lenses.
4
