Handelswetenschappen 2022-2023
International business
Some key terms:
• International Business (IB): the act of performing international economic activities
(“doing business abroad”)
• Firms can engage in IB in two main ways:
o through contractual arrangements (e.g., exports)
o by undertaking foreign direct investment (FDI)
▪ investment aimed at controlling and managing value- added activities in
other countries
• Firms that have undertaken FDI and thus control and manage value-added activities
in multiple countries are called multinational enterprises (MNEs)
o so not all internationally active firms are MNEs
MNEs (and thus FDI) increasingly originate from emerging economies
• Economies that only recently established institutional frameworks that facilitate
international trade and investment, typically with low- or middle-level income and
above average economic growth
o notable examples: BRIC
• Besides having become more important sources of FDI, such economies have also
become more popular FDI destinations
o in part because of Western MNEs’ desire to tap into the ‘base of the pyramid’
o example: Unilever
Other international failures
• Uber, eBay, Media Markt, and LinkedIn in China
• Barclays and Shell (downstream) in Africa
• BP’s joint venture with TNK in Russia
• Daimler-Chrysler merger
• Starbucks in Australia
• Hudson’s Bay in The Netherlands
• Engie and Carrefour have exited about 20 countries each
1
,Handelswetenschappen 2022-2023
Key question
What determines the success and failure of firms around the globe?
General answer: institutions & resources
Why focus on institutions & resources?
• Institutions in foreign countries often pose challenges to firms
• These challenges can be jointly referred to as the “liability of outsidership”
o the inherent disadvantage that outsiders experience in a new (institutional)
environment because of their lack of familiarity with local contexts and networks
• To offset this liability and succeed abroad, firms need to have superior resources and
leverage them there
• In short: institutions and resources jointly determine whether firms will succeed or
fail abroad
2
,Handelswetenschappen 2022-2023
Example: consumer boycotts in China
Another key term: globalization:
• A process leading to greater interdependence and mutual awareness among
economic, political, and social units in the world, and among actors in general
• Main causes:
o technological innovations (e.g., in ICT)
o liberalization
▪ the removal of regulatory restrictions on (international) business
Evidence of globalization
3
, Handelswetenschappen 2022-2023
Most connected countries
Evidence of globalization
4
International business
Some key terms:
• International Business (IB): the act of performing international economic activities
(“doing business abroad”)
• Firms can engage in IB in two main ways:
o through contractual arrangements (e.g., exports)
o by undertaking foreign direct investment (FDI)
▪ investment aimed at controlling and managing value- added activities in
other countries
• Firms that have undertaken FDI and thus control and manage value-added activities
in multiple countries are called multinational enterprises (MNEs)
o so not all internationally active firms are MNEs
MNEs (and thus FDI) increasingly originate from emerging economies
• Economies that only recently established institutional frameworks that facilitate
international trade and investment, typically with low- or middle-level income and
above average economic growth
o notable examples: BRIC
• Besides having become more important sources of FDI, such economies have also
become more popular FDI destinations
o in part because of Western MNEs’ desire to tap into the ‘base of the pyramid’
o example: Unilever
Other international failures
• Uber, eBay, Media Markt, and LinkedIn in China
• Barclays and Shell (downstream) in Africa
• BP’s joint venture with TNK in Russia
• Daimler-Chrysler merger
• Starbucks in Australia
• Hudson’s Bay in The Netherlands
• Engie and Carrefour have exited about 20 countries each
1
,Handelswetenschappen 2022-2023
Key question
What determines the success and failure of firms around the globe?
General answer: institutions & resources
Why focus on institutions & resources?
• Institutions in foreign countries often pose challenges to firms
• These challenges can be jointly referred to as the “liability of outsidership”
o the inherent disadvantage that outsiders experience in a new (institutional)
environment because of their lack of familiarity with local contexts and networks
• To offset this liability and succeed abroad, firms need to have superior resources and
leverage them there
• In short: institutions and resources jointly determine whether firms will succeed or
fail abroad
2
,Handelswetenschappen 2022-2023
Example: consumer boycotts in China
Another key term: globalization:
• A process leading to greater interdependence and mutual awareness among
economic, political, and social units in the world, and among actors in general
• Main causes:
o technological innovations (e.g., in ICT)
o liberalization
▪ the removal of regulatory restrictions on (international) business
Evidence of globalization
3
, Handelswetenschappen 2022-2023
Most connected countries
Evidence of globalization
4
