Theories of International Business Summary

Theories of International Business

Table of Contents

THEME 1 - CORE IB THEORIES.................................................................................................................3

VALUE CHAINS.................................................................................................................................................3
PRODUCT LIFE CYCLE........................................................................................................................................5
FIRM SPECIFIC ADVANTAGES..............................................................................................................................6
OLI MODEL....................................................................................................................................................7
STAGES (UPPSALA) MODEL................................................................................................................................9
INSTITUTION BASED VIEW................................................................................................................................11
READINGS...............................................................................................................................................12
RUGMAN, A.M., VERBEKE, A., & NGUYEN, Q.T.K. 2011. FIFTY YEARS OF INTERNATIONAL BUSINESS THEORY AND
BEYOND. MANAGEMENT INTERNATIONAL REVIEW, 51(6): 755-786......................................................................12
BUCKLEY, P., & CASSON, M.C. 2009. THE INTERNALIZATION THEORY OF THE MULTINATIONAL ENTERPRISE: A REVIEW OF
THE PROGRESS OF A RESEARCH AGENDA AFTER 30 YEARS. JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 40(9): 1563-
1580...........................................................................................................................................................14
PENG, M. 2002. TOWARDS AN INSTITUTION-BASED VIEW OF BUSINESS STRATEGY. ASIA PACIFIC JOURNAL OF
MANAGEMENT, 19(2-3): 251-267..................................................................................................................15
DUNNING, J.H. 2000. THE ECLECTIC PARADIGM AS AN ENVELOPE FOR ECONOMIC AND BUSINESS THEORIES OF MNE
ACTIVITY. INTERNATIONAL BUSINESS REVIEW, 9(2) 163–190................................................................................16

THEME 2 – REGIONAL & GLOBAL INTEGRATION PROCESSES................................................................19

GLOBALISATION.............................................................................................................................................19
DRIVERS OF GLOBALISATION – GARRETT (2000).................................................................................................20
SEMI GLOBALISATION – GHEMAWAT (2003)......................................................................................................23
REGIONALISATION – RUGMAN & VERBEKE (2004)...............................................................................................25
READINGS...............................................................................................................................................26
GARRETT, G. 2000. THE CAUSES OF GLOBALIZATION. COMPARATIVE POLITICAL STUDIES, 33(6/7): 941-991. .............26
GHEMAWAT, P. 2003. SEMI GLOBALIZATION AND INTERNATIONAL BUSINESS STRATEGY. JOURNAL OF INTERNATIONAL
BUSINESS STUDIES, 34(2): 138–152. ..............................................................................................................27
RUGMAN, A. M., & VERBEKE, A. 2004. A PERSPECTIVE ON REGIONAL AND GLOBAL STRATEGIES OF MULTINATIONAL
ENTERPRISES. JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 35(1), 3-18. ...........................................................27


THEME 3 – MNE ENTRY MODES............................................................................................................28

FDI MOTIVES................................................................................................................................................28
MARKET ENTRY MODES: NON-EQUITY...............................................................................................................28
MARKET ENTRY – EQUITY................................................................................................................................31
MARKET ENTRY – SELECTION...........................................................................................................................33

,READINGS...............................................................................................................................................34
DUNNING, J. H. (1998). LOCATION AND THE MULTINATIONAL ENTERPRISE: A NEGLECTED FACTOR? JOURNAL OF
INTERNATIONAL BUSINESS STUDIES, 45-66. .......................................................................................................34
GAO, G.Y., MURRAY, J.Y., KOTABE, M. AND LU, J. (2010) A ‘‘STRATEGY TRIPOD’’ PERSPECTIVE ON EXPORT BEHAVIORS:
EVIDENCE FROM DOMESTIC AND FOREIGN FIRMS BASED IN AN EMERGING ECONOMY. JOURNAL OF INTERNATIONAL
BUSINESS STUDIES, 41(3): 377–396. ..............................................................................................................35
PAN, Y. AND TSE, D.K. (2000) THE HIERARCHICAL MODEL OF MARKET ENTRY MODES. JOURNAL OF INTERNATIONAL
BUSINESS STUDIES, 31(4): 535-554. ...............................................................................................................36
BROUTHERS, K. D., & HENNART, J. (2007). BOUNDARIES OF THE FIRM: INSIGHTS FROM INTERNATIONAL ENTRY MODE
RESEARCH. JOURNAL OF MANAGEMENT, 33(3), 395-425 ...................................................................................38


THEME 4 – HOME AND HOST COUNTRIES.............................................................................................38

DISTANCES....................................................................................................................................................38
CULTURAL DISTANCE.......................................................................................................................................41
CRITIQUE OF CULTURAL DISTANCE.....................................................................................................................42
CAGE FRAMEWORK.......................................................................................................................................44
THE (DOUBLE) DIAMOND MODEL.....................................................................................................................46
SUMMARY OF DISTANCE IN INTERNATIONAL BUSINESS..........................................................................................49
READINGS...............................................................................................................................................50
HUTZSCHENREUTER, T., KLEINDIENST, I., & LANGE, S. (2016). THE CONCEPT OF DISTANCE IN INTERNATIONAL BUSINESS
RESEARCH: A REVIEW AND RESEARCH AGENDA. INTERNATIONAL JOURNAL OF MANAGEMENT REVIEWS, 18(2), 160-179. 50
MOON, H.C., RUGMAN, A.M. AND VERBEKE, A. (1998). A GENERALIZED DOUBLE DIAMOND APPROACH TO THE GLOBAL
COMPETITIVENESS OF KOREA AND SINGAPORE. INTERNATIONAL BUSINESS REVIEW, 7(2): 135–150.............................51
HOFSTEDE, G. (1994).‘THE BUSINESS OF INTERNATIONAL BUSINESS IS CULTURE.’ INTERNATIONAL BUSINESS REVIEW, 3(1):
1-14............................................................................................................................................................52

THEME 5 – NEW MNES.........................................................................................................................53

INTERNATIONAL NEW VENTURES (INVS) AND BORN GLOBALS................................................................................53
EMERGING MARKET MULTINATIONALS (EMMNES).............................................................................................56
READINGS...............................................................................................................................................60
LUO, Y. AND TUNG, R.L. (2007) INTERNATIONAL EXPANSION OF EMERGING MARKET ENTERPRISES: A SPRINGBOARD
PERSPECTIVE. JOURNAL OF INTERNATIONAL BUSINESS STUDIES, 38(4): 481-498......................................................60
OVIATT, B.M. AND MCDOUGALL, P.P. (2005) TOWARD A THEORY OF INTERNATIONAL NEW VENTURES. JOURNAL OF
INTERNATIONAL BUSINESS STUDIES, 36(1): 29-41...............................................................................................62

,Theme 1 - Core IB Theories
 Traditionally, international business (IB) is defined as a business or firm that
engages in international economic activities
 IB is about managing complexity and uncertainty
o Cross border activity brings new challenges
o Requiring awareness and strategic thinking
 Core theories of international business
o At the country level
o At the firm level
o At the subsidiary level (daughter company)
 Resource-based View of IB
 Institutional-based View of IB
Value Chains
 We can look at an industry’s and a company’s value chain




 The different business functions and the different stages where they add
value
Michael Porter’s value
chain



 Primary
activities –
where a product
is built, and
value is added
o
Remember-
a
company
is not just
one
block,
there are
multiple
departments that each have different functions
Value chain and the Boundary of the Firm

,  Boundary of the firm – what does the firm do itself and what does someone
else do
o A firm that has all the activities within in its own firm, like marketing,
distribution etc.
 Otherwise, you can outsource some of these activities – e.g., logistics or final
assembly.
o Like Heineken outsourcing the creative aspect of their marketing to
TBWA
 And their social media content to Boomerang
The International Industry Value Chain
 With IB they have the whole world to move their value chain around
 From ‘centre of gravity’ to vertical integration
 Where are the ‘profit pools’, and where does a company have strategic
capabilities?
 Where to expand, where to divest?
 What local market factors/institutions enter these decisions?
Outsourcing vs. FDI
 Outsourcing: turning over an organizational activity to an outside supplier
that will perform it on behalf of the focal firm
o Offshore: outsourcing to a firm abroad
o Onshore: outsourcing to a domestic firm
 Outsourcing is in contrast to FDI where you set up subsidiaries abroad and
the work is done “in-house”, but the location is overseas
Value chain
 Think in terms of Apple
o The products are designed in California, here a lot of value is added to
the product
o The final assembly however is in China, this is outsourced because it
is much cheaper
 The company that handles this is Foxconn
 Also, Apple advertising, this is typically outsourced
 Think also of iPhone cases, these are produced by all kinds of different
companies – these fall outside of Apple’s value chain
What is a MNE (TNC, MNC)?
 MNE = A company that engages in international (cross-border) economic
activities
 Transnational Corporation’s (TNCs) = incorporated or unincorporated
enterprises comprising parent enterprises and their foreign affiliates
 A parent enterprise is defined as an enterprise that controls assets of
other entities in countries other than its home country, usually by
owning a certain equity capital stake