Economic Foundations of International Business

Research output: Working paperResearchpeer-review

Abstract

The discipline of International Business, henceforth IB, is a child of the 1960s. It has developed into a respectable branch of the social sciences, with strong links to a number of disciplines such as marketing, strategy, organization, cultural studies and economics. All along it has been discussed if IB should be anchored in separate departments or integrated in other functional departments, reflecting the topic whether “internationalization” is sufficiently powerful to command its own strands of teaching, or it should be incorporated in finance, marketing, organization and strategy. This topic remains unsolved. From a research perspective, an IB field has developed with its own journals and research societies. Taking a broad look at the research field, what do we see?
A handful of dominating theoretical approaches such as resource based theory, learning models, transaction cost theory and on the top of it all the eclectic paradigm which attempts to catch most of the rest under a very wide umbrella. Entry, or operation modes and the organizational design of the international company still play significant roles, not least the multinational enterprise and its cross-border investments, FDI. The field has matured in the sense that while empirical studies dominate articles in leading journals, theoretical development seems to have stalled.
The state of IB raises at least three questions which are more or less intertwined. First, do attempts to integrate various sub theories of IB, such as transaction cost theory and resource based theory make sense; for instance does the eclectic paradigm represent a fruitful unification of IB thinking? Second, what has happened to the concept of strategy in the process of developing IB theories? Third, a revitalizing of the theoretical foundations of IB theory will take us back to their roots in economic theory for a fresh start.
The three questions are related in the way that a return to the economic foundations of IB theory – all developed by leading economists in the 1930s – at the same time opens for a new strategic orientation of the discipline of IB. The four basic economic contributions concern the essence of IB activity: opportunity spotting, positioning, innovation and organization of the business. Combinations of the four economic schools between them cover the six strategic objectives: strategic planning, strategic implementation, strategic control, corporate governance, strategic fit and organizational fit.
Original languageEnglish
Number of pages20
Publication statusPublished - 2018

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