Theories of International Business
Summary By Beaudine van den Berg
,Table of Contents
Theme 1: Core IB Theories 3
Rugman, Verbeke, & Nguyen (2011) - Fifty Years of International Business
Theory and Beyond 6
Buckley & Casson (2009) - The Internalization Theory of The
Multinational Enterprise: A Review of The Progress of A Research
Agenda After 30 Years 7
Peng (2001) - The Resource-based View and International Business 10
Peng (2002) - Towards an Institution-based View of Business Strategy 11
Theme 2: Global integration Processes 13
Discussion case: Meyer (2015) - Getting to si, ja, oui, hai, and da 13
Garrett (2000) - The Causes of Globalization 14
Ghemawat (2003) - Semiglobalization and International Business Strategy
17
IB for a Semi-globalized world 19
Rugman & Verbeke (2004) - A perspective on regional and global
strategies of multinational enterprises 19
Theme 3: MNE Entry Modes 21
Dunning (1998) - Location and the multinational enterprise: A neglected
factor? 21
Gao, Murray, Kotabe, and Lu (2010) - A ‘‘Strategy Tripod’’ Perspective On
Export Behaviors: Evidence From Domestic And Foreign Firms Based In
An Emerging Economy 22
Pan & Tse (2000) - The Hierarchical Model of Market Entry Modes 23
Brouthers & Hennart (2007) -Boundaries of the firm: Insights from
international entry mode research 27
Brennan (2018) - How Netflix expanded to 190 countries in 7 years 29
Theme 4: Home and Host Countries and Concepts of Distance 30
Hutzschenreuter, Kleindienst & Lange (2016) - The concept of distance in
international business research: A review and research agenda 31
Hofstede (1994) - The Business of International Business is Culture 33
Ghemawat (2001) - Distance still matters 34
Moon, Rugman, and Verbeke (1998) - A Generalized Double Diamond
Approach to the Global Competitiveness of Korea and Singapore 37
Theme 5: New MNEs 41
Oviatt and McDougall (2005) - Toward a Theory of International New
Ventures 41
Isenberg (2009) - The Global Entrepreneur: A new breed of entrepreneur
is thinking across borders – from day one 43
Luo and Tung (2007) - International Expansion of Emerging Market
Enterprises: A springboard perspective 45
,Theme 1: Core IB Theories
Conceptualizing IB
International Business
→ A business that engages in international economic activities (Either Foreign or Domestic).
→ It is about managing complexity and uncertainty:
● Cross-border activities bring new challenges
● Require awareness and strategic thinking
Vertical Integration
→ using internal exchanges rather than market transactions to carry out a business activity
● Only adds value when the transaction is frequent enough to justify integration and
● Disadvantages
○ Increases asset base and capital employed
○ Reduces flexibility & Prevents access to external expertise
○ Impossible to fully benefit from supplier efficiency and scale
○ Reduces focus on core business/ capabilities
○ Converts variable costs into fixed costs
○ Blurs evaluation/ knowledge of costs
Outsourcing
→ Turning over an organizational activity to an outside supplier that will perform it on behalf
of the local firm
● Offshore → firm abroad
● Onshore → domestic firm
● Inconstrast to FDI where you set up subsidiaries abroad and the work done is
in-house but the location is overseas
Vertical Integration vs. Outsourcing?
● Problems associated with outsourcing
● Dependence created by co-specialization or co-location
● Inadequate performance: Customization/ quality/ availability
● Dependence created by market power
● Hold up Loss of critical know-how
● Weakened commitment/ Competitive signaling
● Spillover to competition
● Declining differentiation
, Global value chain: The Smiling Curve
Value chain and the boundary of the firm - Outsourcing and the corporate value chain
Multinational Corporation (MNC)
→ A company that engages in international (cross-border) economic activities
Transnational Corporations (TCN)
→ Are incorporated or unincorporated enterprises compromising parent enterprises and their
foreign affiliates
● Parent enterprise is an enterprise that controls assets of other entities in countries
other than its home country, usually by owning a certain equity capital stake
Foreign Direct Investment (FDI)
○ An investment made to acquire lasting interest in enterprises
○ Operating outside of the economy of the investor
○ The investors purpose is to gain an effective voice in the management of the
enterprise (UNCTAD)
○ FDI is a firm level strategic decision rather than a capital market financial
decision (Dunning and rugman 1985)
Summary By Beaudine van den Berg
,Table of Contents
Theme 1: Core IB Theories 3
Rugman, Verbeke, & Nguyen (2011) - Fifty Years of International Business
Theory and Beyond 6
Buckley & Casson (2009) - The Internalization Theory of The
Multinational Enterprise: A Review of The Progress of A Research
Agenda After 30 Years 7
Peng (2001) - The Resource-based View and International Business 10
Peng (2002) - Towards an Institution-based View of Business Strategy 11
Theme 2: Global integration Processes 13
Discussion case: Meyer (2015) - Getting to si, ja, oui, hai, and da 13
Garrett (2000) - The Causes of Globalization 14
Ghemawat (2003) - Semiglobalization and International Business Strategy
17
IB for a Semi-globalized world 19
Rugman & Verbeke (2004) - A perspective on regional and global
strategies of multinational enterprises 19
Theme 3: MNE Entry Modes 21
Dunning (1998) - Location and the multinational enterprise: A neglected
factor? 21
Gao, Murray, Kotabe, and Lu (2010) - A ‘‘Strategy Tripod’’ Perspective On
Export Behaviors: Evidence From Domestic And Foreign Firms Based In
An Emerging Economy 22
Pan & Tse (2000) - The Hierarchical Model of Market Entry Modes 23
Brouthers & Hennart (2007) -Boundaries of the firm: Insights from
international entry mode research 27
Brennan (2018) - How Netflix expanded to 190 countries in 7 years 29
Theme 4: Home and Host Countries and Concepts of Distance 30
Hutzschenreuter, Kleindienst & Lange (2016) - The concept of distance in
international business research: A review and research agenda 31
Hofstede (1994) - The Business of International Business is Culture 33
Ghemawat (2001) - Distance still matters 34
Moon, Rugman, and Verbeke (1998) - A Generalized Double Diamond
Approach to the Global Competitiveness of Korea and Singapore 37
Theme 5: New MNEs 41
Oviatt and McDougall (2005) - Toward a Theory of International New
Ventures 41
Isenberg (2009) - The Global Entrepreneur: A new breed of entrepreneur
is thinking across borders – from day one 43
Luo and Tung (2007) - International Expansion of Emerging Market
Enterprises: A springboard perspective 45
,Theme 1: Core IB Theories
Conceptualizing IB
International Business
→ A business that engages in international economic activities (Either Foreign or Domestic).
→ It is about managing complexity and uncertainty:
● Cross-border activities bring new challenges
● Require awareness and strategic thinking
Vertical Integration
→ using internal exchanges rather than market transactions to carry out a business activity
● Only adds value when the transaction is frequent enough to justify integration and
● Disadvantages
○ Increases asset base and capital employed
○ Reduces flexibility & Prevents access to external expertise
○ Impossible to fully benefit from supplier efficiency and scale
○ Reduces focus on core business/ capabilities
○ Converts variable costs into fixed costs
○ Blurs evaluation/ knowledge of costs
Outsourcing
→ Turning over an organizational activity to an outside supplier that will perform it on behalf
of the local firm
● Offshore → firm abroad
● Onshore → domestic firm
● Inconstrast to FDI where you set up subsidiaries abroad and the work done is
in-house but the location is overseas
Vertical Integration vs. Outsourcing?
● Problems associated with outsourcing
● Dependence created by co-specialization or co-location
● Inadequate performance: Customization/ quality/ availability
● Dependence created by market power
● Hold up Loss of critical know-how
● Weakened commitment/ Competitive signaling
● Spillover to competition
● Declining differentiation
, Global value chain: The Smiling Curve
Value chain and the boundary of the firm - Outsourcing and the corporate value chain
Multinational Corporation (MNC)
→ A company that engages in international (cross-border) economic activities
Transnational Corporations (TCN)
→ Are incorporated or unincorporated enterprises compromising parent enterprises and their
foreign affiliates
● Parent enterprise is an enterprise that controls assets of other entities in countries
other than its home country, usually by owning a certain equity capital stake
Foreign Direct Investment (FDI)
○ An investment made to acquire lasting interest in enterprises
○ Operating outside of the economy of the investor
○ The investors purpose is to gain an effective voice in the management of the
enterprise (UNCTAD)
○ FDI is a firm level strategic decision rather than a capital market financial
decision (Dunning and rugman 1985)
