International Business Context – Articles
Master Business Administration 2021-2022
Shannon Karhof – Grade 8.5
Table of Contents
Theme 1: Introduction to International Business Context .................................................................. 3
Article 1: Buckley et al. The Future of the Multinational Enterprise. London: The Macmillan Press,
(1976). ........................................................................................................................................... 3
Article 1: Short Answer .................................................................................................................. 4
Article 2: Narula et al. Applying and advancing internalization theory: The multinational enterprise
in the twenty-first century. (2019). ................................................................................................ 5
Article 2: Short Answer .................................................................................................................. 7
Article 3: Dunning, J. Toward an Eclectic Theory of International Production: Some Empirical Tests.
(1980). ........................................................................................................................................... 8
Article 3: Short Answer ................................................................................................................ 10
Theme 2: Institution ........................................................................................................................ 11
Article 1: North D.C. 1991, Institutions. Journal of Economic Perspectives.................................... 11
Article 1: Short answer ................................................................................................................ 13
Article 2: Hall & Soskice (2001). Varieties of capitalism: The institutional foundations of
comparative advantage ............................................................................................................... 14
Article 2: Short answer ................................................................................................................ 16
Article 3: Berry et al. (2010). An institutional approach to cross- national distance ...................... 17
Article 3: Short answer ................................................................................................................ 19
Theme 3: Culture ............................................................................................................................. 20
Article 1: Voss et al. (2014). Supranational culture ii: comparison of Schwartz value survey data
against Hofstede, GLOBE, and Minkov as predictors of civilizational affiliation. ............................ 20
Article 1: Short answer ................................................................................................................ 22
Article 2: Chiu & Hong (2007). Cultural processes: Basic principles .............................................. 23
Article 2: Short answer ................................................................................................................ 25
Article 3: Sarala & Vaara (2010) Cultural differences, convergence, and crossvergence as
explanations of knowledge transfer in international acquisitions. ................................................ 26
Article 3: Short answer ................................................................................................................ 28
Theme 4: Corporate Governance ..................................................................................................... 29
Article 1: Aguilera & Jackson (2003). The cross-national diversity of corporate governance:
Dimensions and determinants. .................................................................................................... 29
Article 1: Short answer ................................................................................................................ 32
1
,Article 2: Oliver, C. (1991). Strategic responses to institutional processes. ................................... 33
Article 2: Short Answers............................................................................................................... 36
Article 3: Haxhi & Aguilera (2017). An Institutional Configurational Approach to Cross- National
Diversity in Corporate Governance. ............................................................................................. 37
Article 3: Short answers ............................................................................................................... 40
Extra question: ............................................................................................................................ 41
2
,Theme 1: Introduction to International Business Context
Article 1: Buckley et al. The Future of the Multinational Enterprise. London:
The Macmillan Press, (1976).
Abstract/Introduction
• Currently there is no established theory of the MNE
• The fault lies with the orthodox theories of production and trade as these are unable to explain or
predict the post-war growth of MNEs.
• Study executed: Analysis of the internationalization of an intermediate product market
Key concern/purpose (2)
They executed an analysis of the internalization in an intermediate product market to see the factors
that trigger it. Through this they present a new theory of the MNE, based on 3 postulates
Assumption/Principle:
Present an MNE theory based on 3 postulates:
1. Firms maximize profit in a world of imperfect markets.
2. A way to avoid imperfection (transaction cost problems) in intermediate markets is the creation
of internal markets
3. Internalization of markets across boundaries (internationally) generates MNEs.
Key takeaways
(1) The New Theory of the MNE (4)
1. Endorses the second assumption of Orthodox theories ‘Pefect Competition’ (not first one, ‘Profit
Maximization’)
2. 2 Differences
1. it looks at intermediate markets, rather than final markets
2. emphasizes that imperfect competition comes from the cost of organizing Maximization
3. Internalization of a market happens when Benefits > costs
4. 3 postulates (see above)
(2) 5 benefit types + 4 cost types
(3) Findings – (6)
• A market in an intermediate good will be internalized if the benefits > cost. = confirmed
• An MNE is created whenever markets are internalized across national boundaries = confirmed
• The resource costs are unlikely to be a significant influence on the internalization decision.
• Prior to WW2 multinationality was a by-product of the internalization of intermediate markets
→ Post-war it is a by-product of the internalization of markets in knowledge.
• The more research intensive in the first stage of aggressive growth, the more likely it is to be an
MNE and the faster it is likely to grow.
• The incentive to internalize depends on the interplay of the following factors:
1. Industry-specific factors → main emphasis in this article
The nature of the product/structure of the external market
2. Region-specific factors
The geographical and social characteristics of the regions linked by the market
3. Nation-specific factors
The political and fiscal relations between the nations concerned
4. Firm-specific factors
The ability of the management to organize an internal market – degree of professionalization
3
, Article 1: Short Answer
According to Buckley et al. (1976), why are multinational enterprises (MNEs) created and expanded?
Buckley et al. (1976) use the internalization theory that considers imperfections in markets for
intermediate products and suggests that
→ MNEs internalize these markets to increase profits by bringing activities under common ownership
and control.
According to the Transaction Cost Economics (TCE) approach, internalization is recommended when
the costs of doing business at arm's length (exports/imports) are higher than costs of internalization.
→ Thus, Buckley takes a TCE approach to internalization, studying various factors influencing the
transaction costs.
Among 4 main groups of factors which are relevant to the internalization decisions?
Internalization is important for dynamic innovation processes regulated by intermediate products and
thus MNEs expand their boundaries to internalize markets of knowledge and maximize profits.
Four main groups of factors relevant to internalization decision are
i) Industry-specific factors that define product characteristics and external market structure,
ii) Region-specific factors that define geographical and social characteristics,
iii) Nation-specific factors that define political and fiscal conditions
iv) Firm-specific factors that reflect the management’s ability to organize internal markets
Which of them could be the contextual factors and why?
All the factors, except firm specific ones, are contextual in the sense that
→ they define the boundaries of the firm and its interaction with the external environment.
o Industry-specific factors are concerned with knowledge production, expansion, and influences of
the industry on firm’s boundaries.
o Region- and nation-specific factors are linked to the institutional environment, trade laws and
barriers, local practices which are influenced by culture and social norms.
4
Master Business Administration 2021-2022
Shannon Karhof – Grade 8.5
Table of Contents
Theme 1: Introduction to International Business Context .................................................................. 3
Article 1: Buckley et al. The Future of the Multinational Enterprise. London: The Macmillan Press,
(1976). ........................................................................................................................................... 3
Article 1: Short Answer .................................................................................................................. 4
Article 2: Narula et al. Applying and advancing internalization theory: The multinational enterprise
in the twenty-first century. (2019). ................................................................................................ 5
Article 2: Short Answer .................................................................................................................. 7
Article 3: Dunning, J. Toward an Eclectic Theory of International Production: Some Empirical Tests.
(1980). ........................................................................................................................................... 8
Article 3: Short Answer ................................................................................................................ 10
Theme 2: Institution ........................................................................................................................ 11
Article 1: North D.C. 1991, Institutions. Journal of Economic Perspectives.................................... 11
Article 1: Short answer ................................................................................................................ 13
Article 2: Hall & Soskice (2001). Varieties of capitalism: The institutional foundations of
comparative advantage ............................................................................................................... 14
Article 2: Short answer ................................................................................................................ 16
Article 3: Berry et al. (2010). An institutional approach to cross- national distance ...................... 17
Article 3: Short answer ................................................................................................................ 19
Theme 3: Culture ............................................................................................................................. 20
Article 1: Voss et al. (2014). Supranational culture ii: comparison of Schwartz value survey data
against Hofstede, GLOBE, and Minkov as predictors of civilizational affiliation. ............................ 20
Article 1: Short answer ................................................................................................................ 22
Article 2: Chiu & Hong (2007). Cultural processes: Basic principles .............................................. 23
Article 2: Short answer ................................................................................................................ 25
Article 3: Sarala & Vaara (2010) Cultural differences, convergence, and crossvergence as
explanations of knowledge transfer in international acquisitions. ................................................ 26
Article 3: Short answer ................................................................................................................ 28
Theme 4: Corporate Governance ..................................................................................................... 29
Article 1: Aguilera & Jackson (2003). The cross-national diversity of corporate governance:
Dimensions and determinants. .................................................................................................... 29
Article 1: Short answer ................................................................................................................ 32
1
,Article 2: Oliver, C. (1991). Strategic responses to institutional processes. ................................... 33
Article 2: Short Answers............................................................................................................... 36
Article 3: Haxhi & Aguilera (2017). An Institutional Configurational Approach to Cross- National
Diversity in Corporate Governance. ............................................................................................. 37
Article 3: Short answers ............................................................................................................... 40
Extra question: ............................................................................................................................ 41
2
,Theme 1: Introduction to International Business Context
Article 1: Buckley et al. The Future of the Multinational Enterprise. London:
The Macmillan Press, (1976).
Abstract/Introduction
• Currently there is no established theory of the MNE
• The fault lies with the orthodox theories of production and trade as these are unable to explain or
predict the post-war growth of MNEs.
• Study executed: Analysis of the internationalization of an intermediate product market
Key concern/purpose (2)
They executed an analysis of the internalization in an intermediate product market to see the factors
that trigger it. Through this they present a new theory of the MNE, based on 3 postulates
Assumption/Principle:
Present an MNE theory based on 3 postulates:
1. Firms maximize profit in a world of imperfect markets.
2. A way to avoid imperfection (transaction cost problems) in intermediate markets is the creation
of internal markets
3. Internalization of markets across boundaries (internationally) generates MNEs.
Key takeaways
(1) The New Theory of the MNE (4)
1. Endorses the second assumption of Orthodox theories ‘Pefect Competition’ (not first one, ‘Profit
Maximization’)
2. 2 Differences
1. it looks at intermediate markets, rather than final markets
2. emphasizes that imperfect competition comes from the cost of organizing Maximization
3. Internalization of a market happens when Benefits > costs
4. 3 postulates (see above)
(2) 5 benefit types + 4 cost types
(3) Findings – (6)
• A market in an intermediate good will be internalized if the benefits > cost. = confirmed
• An MNE is created whenever markets are internalized across national boundaries = confirmed
• The resource costs are unlikely to be a significant influence on the internalization decision.
• Prior to WW2 multinationality was a by-product of the internalization of intermediate markets
→ Post-war it is a by-product of the internalization of markets in knowledge.
• The more research intensive in the first stage of aggressive growth, the more likely it is to be an
MNE and the faster it is likely to grow.
• The incentive to internalize depends on the interplay of the following factors:
1. Industry-specific factors → main emphasis in this article
The nature of the product/structure of the external market
2. Region-specific factors
The geographical and social characteristics of the regions linked by the market
3. Nation-specific factors
The political and fiscal relations between the nations concerned
4. Firm-specific factors
The ability of the management to organize an internal market – degree of professionalization
3
, Article 1: Short Answer
According to Buckley et al. (1976), why are multinational enterprises (MNEs) created and expanded?
Buckley et al. (1976) use the internalization theory that considers imperfections in markets for
intermediate products and suggests that
→ MNEs internalize these markets to increase profits by bringing activities under common ownership
and control.
According to the Transaction Cost Economics (TCE) approach, internalization is recommended when
the costs of doing business at arm's length (exports/imports) are higher than costs of internalization.
→ Thus, Buckley takes a TCE approach to internalization, studying various factors influencing the
transaction costs.
Among 4 main groups of factors which are relevant to the internalization decisions?
Internalization is important for dynamic innovation processes regulated by intermediate products and
thus MNEs expand their boundaries to internalize markets of knowledge and maximize profits.
Four main groups of factors relevant to internalization decision are
i) Industry-specific factors that define product characteristics and external market structure,
ii) Region-specific factors that define geographical and social characteristics,
iii) Nation-specific factors that define political and fiscal conditions
iv) Firm-specific factors that reflect the management’s ability to organize internal markets
Which of them could be the contextual factors and why?
All the factors, except firm specific ones, are contextual in the sense that
→ they define the boundaries of the firm and its interaction with the external environment.
o Industry-specific factors are concerned with knowledge production, expansion, and influences of
the industry on firm’s boundaries.
o Region- and nation-specific factors are linked to the institutional environment, trade laws and
barriers, local practices which are influenced by culture and social norms.
4
