AN EXAMINATION OF CORE
Book
Verbeke, A. International Business Strategy. Cambridge, UK: Cambridge University Press.
CONCEPTS IN INTERNATIONAL
BUSINESS STRATEGY (325101-
M-6)
A Summary of Verbeke (Chapters 1-7, 11-15, 17A)
, Contents
1. PART I: FOUNDATIONAL CONCEPTS OF INTERNATIONAL STRATEGY........................................................2
1.1. Chapter 1: Conceptual Foundations of International Business Strategy...............................................2
1.2. Chapter 2: The Critical Role of Firm-Specific Advantages (FSAs)..........................................................4
2. PART II: THE STRATEGIC ENVIRONMENT: HOME AND HOST COUNTRIES................................................6
2.1. Chapter 3: The Nature of Home Country Location Advantages............................................................6
2.2. Chapter 4: The Problem with Host Country Location Advantages........................................................7
3. PART III: STRUCTURING AND MANAGING THE MULTINATIONAL NETWORK...........................................9
3.1. Chapter 5: Combining FSAs and Location Advantages in a Multinational Network..............................9
3.2. Chapter 6: International Innovation..................................................................................................10
3.3. Chapter 7: International Sourcing and Production............................................................................11
4. PART IV: MODES OF INTERNATIONAL EXPANSION................................................................................13
4.1. Chapter 11: Entry Mode Dynamics 1: Foreign Distributors................................................................13
4.2. Chapter 12: Entry Mode Dynamics 2: Strategic Alliance Partners......................................................13
4.3. Chapter 13: Entry Mode Dynamics 3: Mergers and Acquisitions........................................................14
5. PART V: CONTEMPORARY ISSUES IN INTERNATIONAL STRATEGY.........................................................16
5.1. Chapter 14: The Role of Emerging Economies...................................................................................16
5.2. Chapter 15: Emerging Economy Multinational Enterprises (EMNEs)..................................................17
5.3. Chapter 17A: International Strategies of Corporate Social Responsibility (CSR).................................18
Page 1 of 19
, 1. PART I: FOUNDATIONAL CONCEPTS OF INTERNATIONAL STRATEGY
This initial section establishes the fundamental building blocks of international business strategy. It
introduces a unifying framework that systematically connects a firm's internal capabilities with the
complexities of the external, cross-border environment. These core concepts provide the theoretical lens
through which all subsequent strategic decisions and organizational structures are analyzed.
1.1. Chapter 1: Conceptual Foundations of International Business Strategy
The study of international business strategy begins with a precise definition of its purpose: the effective
and efficient matching of a Multinational Enterprise’s (MNE’s) internal strengths, relative to its competitors,
with the opportunities and challenges inherent in geographically dispersed environments that cross
international borders. This strategic matching is the fundamental precondition for creating value and
satisfying the goals of stakeholders, both in the MNE's home country and internationally. To deconstruct
this complex matching process, a unifying framework consisting of seven core concepts is employed.
The Unifying Framework's Seven Concepts
1. Internationally Transferable (Non-Location-Bound) Firm-Specific Advantages (FSAs): An MNE, by
definition, operates at an initial disadvantage compared to local rivals in a host country, as these
domestic firms possess a knowledge base better suited to local stakeholder requirements. To
overcome this "liability of foreignness," the MNE must possess a set of internal strengths, or FSAs,
that do not lose their value-creating potential when transferred across borders. These non-location-
bound FSAs can include proprietary technologies, globally recognized brand names, or unique
managerial routines that are applicable in diverse cultural and economic settings.
2. Non-Transferable (Location-Bound) FSAs: In contrast, some of an MNE's strengths are deeply
embedded in its home country environment and cannot be easily transferred, deployed, or
exploited in foreign markets. These location-bound FSAs include stand-alone resources linked to
specific home-country location advantages, deep local marketing knowledge, reputational resources
tied to the domestic market, and the firm’s domestic recombination capability, which may not be
adapted for international contexts.
3. Location Advantages: These are the entire set of strengths inherent to a specific geographic
location, accessible by any firm operating there. These advantages should always be assessed
relative to the strengths of other locations. MNEs engage in international activities to access these
advantages, which can be categorized into four primary motivations: natural resource seeking,
market seeking, strategic resource seeking (e.g., accessing advanced knowledge clusters), and
efficiency seeking (e.g., capitalizing on lower labor costs).
4. Investment in and Value Creation through Recombination: The most critical strengths of an MNE
are typically not its stand-alone physical or financial assets. Instead, sustainable competitive
advantage derives from its valuable, often proprietary knowledge, particularly its routines and
recombination capabilities. The ability to recombine existing resources and knowledge into new,
innovative bundles is considered the MNE’s highest-order FSA. This capability allows the firm not
only to transfer its existing FSAs but also to create new knowledge across its global network to
satisfy evolving stakeholder needs.
Page 2 of 19
Book
Verbeke, A. International Business Strategy. Cambridge, UK: Cambridge University Press.
CONCEPTS IN INTERNATIONAL
BUSINESS STRATEGY (325101-
M-6)
A Summary of Verbeke (Chapters 1-7, 11-15, 17A)
, Contents
1. PART I: FOUNDATIONAL CONCEPTS OF INTERNATIONAL STRATEGY........................................................2
1.1. Chapter 1: Conceptual Foundations of International Business Strategy...............................................2
1.2. Chapter 2: The Critical Role of Firm-Specific Advantages (FSAs)..........................................................4
2. PART II: THE STRATEGIC ENVIRONMENT: HOME AND HOST COUNTRIES................................................6
2.1. Chapter 3: The Nature of Home Country Location Advantages............................................................6
2.2. Chapter 4: The Problem with Host Country Location Advantages........................................................7
3. PART III: STRUCTURING AND MANAGING THE MULTINATIONAL NETWORK...........................................9
3.1. Chapter 5: Combining FSAs and Location Advantages in a Multinational Network..............................9
3.2. Chapter 6: International Innovation..................................................................................................10
3.3. Chapter 7: International Sourcing and Production............................................................................11
4. PART IV: MODES OF INTERNATIONAL EXPANSION................................................................................13
4.1. Chapter 11: Entry Mode Dynamics 1: Foreign Distributors................................................................13
4.2. Chapter 12: Entry Mode Dynamics 2: Strategic Alliance Partners......................................................13
4.3. Chapter 13: Entry Mode Dynamics 3: Mergers and Acquisitions........................................................14
5. PART V: CONTEMPORARY ISSUES IN INTERNATIONAL STRATEGY.........................................................16
5.1. Chapter 14: The Role of Emerging Economies...................................................................................16
5.2. Chapter 15: Emerging Economy Multinational Enterprises (EMNEs)..................................................17
5.3. Chapter 17A: International Strategies of Corporate Social Responsibility (CSR).................................18
Page 1 of 19
, 1. PART I: FOUNDATIONAL CONCEPTS OF INTERNATIONAL STRATEGY
This initial section establishes the fundamental building blocks of international business strategy. It
introduces a unifying framework that systematically connects a firm's internal capabilities with the
complexities of the external, cross-border environment. These core concepts provide the theoretical lens
through which all subsequent strategic decisions and organizational structures are analyzed.
1.1. Chapter 1: Conceptual Foundations of International Business Strategy
The study of international business strategy begins with a precise definition of its purpose: the effective
and efficient matching of a Multinational Enterprise’s (MNE’s) internal strengths, relative to its competitors,
with the opportunities and challenges inherent in geographically dispersed environments that cross
international borders. This strategic matching is the fundamental precondition for creating value and
satisfying the goals of stakeholders, both in the MNE's home country and internationally. To deconstruct
this complex matching process, a unifying framework consisting of seven core concepts is employed.
The Unifying Framework's Seven Concepts
1. Internationally Transferable (Non-Location-Bound) Firm-Specific Advantages (FSAs): An MNE, by
definition, operates at an initial disadvantage compared to local rivals in a host country, as these
domestic firms possess a knowledge base better suited to local stakeholder requirements. To
overcome this "liability of foreignness," the MNE must possess a set of internal strengths, or FSAs,
that do not lose their value-creating potential when transferred across borders. These non-location-
bound FSAs can include proprietary technologies, globally recognized brand names, or unique
managerial routines that are applicable in diverse cultural and economic settings.
2. Non-Transferable (Location-Bound) FSAs: In contrast, some of an MNE's strengths are deeply
embedded in its home country environment and cannot be easily transferred, deployed, or
exploited in foreign markets. These location-bound FSAs include stand-alone resources linked to
specific home-country location advantages, deep local marketing knowledge, reputational resources
tied to the domestic market, and the firm’s domestic recombination capability, which may not be
adapted for international contexts.
3. Location Advantages: These are the entire set of strengths inherent to a specific geographic
location, accessible by any firm operating there. These advantages should always be assessed
relative to the strengths of other locations. MNEs engage in international activities to access these
advantages, which can be categorized into four primary motivations: natural resource seeking,
market seeking, strategic resource seeking (e.g., accessing advanced knowledge clusters), and
efficiency seeking (e.g., capitalizing on lower labor costs).
4. Investment in and Value Creation through Recombination: The most critical strengths of an MNE
are typically not its stand-alone physical or financial assets. Instead, sustainable competitive
advantage derives from its valuable, often proprietary knowledge, particularly its routines and
recombination capabilities. The ability to recombine existing resources and knowledge into new,
innovative bundles is considered the MNE’s highest-order FSA. This capability allows the firm not
only to transfer its existing FSAs but also to create new knowledge across its global network to
satisfy evolving stakeholder needs.
Page 2 of 19
