Match!

Applying and Advancing Internalization Theory: The Multinational Enterprise in the Twenty-first Century

Published on Aug 26, 2019in Journal of International Business Studies
· DOI :10.1057/S41267-019-00260-6
Rajneesh Narula40
Estimated H-index: 40
(University of Reading),
Christian Geisler Asmussen14
Estimated H-index: 14
('KCL': King's College London)
+ 1 AuthorsSumit K. Kundu24
Estimated H-index: 24
(FIU: Florida International University)
Sources
Abstract
Internalization theory has provided a resilient analytical framework that explicitly or implicitly underlines much of International Business scholarship. Internalization theory is not a monolithic body of knowledge; instead, it has devolved into several ‘streams’, each of which focuses on the interests of particular epistemic communities, while also acting as a more generic organizing framework for those more broadly interested in its application to real-world challenges. Following a review of the various streams, we trace the frontiers of current research of the broader internalization framework and identify emerging themes raised by the papers in the special issue. These include transaction cost considerations in the bundling and recombination of assets across diverse contexts, the growing relevance of quasi-internalization, the theoretical challenges of (bounded) rationality for internalization theory, and the increasing disconnect between ownership, control and responsibility. These developments point to new research frontiers for scholars looking to apply or advance internalization theory.
  • References (153)
  • Citations (11)
📖 Papers frequently viewed together
2008
47 Citations
72 Citations
171 Citations
78% of Scinapse members use related papers. After signing in, all features are FREE.
References153
Newest
The 2013 collapse of the Rana Plaza building in Dhaka, Bangladesh, led external stakeholders to insist on higher labor standards in apparel global value chains (GVCs). Stakeholders now expect MNEs to take ‘full-chain’ responsibility. However, the increased monitoring and enforcement costs of a large network of suppliers have been non-trivial. MNEs instead implement a ‘cascading compliance’ approach, coupled with a partial re-internalization. Elevated costs are further exacerbated in developing c...
8 CitationsSource
#1Peter J. Buckley (University of Leeds)H-Index: 60
#2Mark Casson (University of Reading)H-Index: 43
This paper builds on preceding papers. It distinguishes three domains of international business theory: the boundaries of the multinational enterprise, the external environment of the enterprise and its internal structure. The central concern of internalisation theory is the boundaries of the firm. Any general theory of international business must also analyse the external environment and internal structure. Competition dominates the external environment while co-operation dominates internal str...
2 CitationsSource
#1Jean-François Hennart (WU: Vienna University of Economics and Business)H-Index: 1
#1Jean-François Hennart (Polytechnic University of Milan)H-Index: 42
Banalieva and Dhanaraj argue that digital service multinationals (DSMNCs) possess a new category of firm-specific advantage (FSA), the network advantage, and that, contrary to extant theory, they use networks as a mode of governance. I review the business models used by DSMNCs, compare them to non-digital ones, and explore what we can learn about them from extant IB theory. I conclude that network advantages are not a new category of FSAs, that networks are not a mode of governance, and that the...
5 CitationsSource
#1Teresa da Silva Lopes (Ebor: University of York)H-Index: 10
#2Mark Casson (University of Reading)H-Index: 43
Last. Geoffrey Jones (Harvard University)H-Index: 28
view all 3 authors...
This article engages in a methodological experiment by using historical evidence to challenge a common misperception about internalization theory. The theory has often been criticized for maintaining that it assumes a hierarchically organized MNE based on knowledge flowing from the home country. This is not an accurate description of how global firms operate in recent decades, but this article shows it has never been true historically. Using longitudinal data on individual firms from the ninetee...
4 CitationsSource
#1Stefano Elia (Polytechnic University of Milan)H-Index: 12
#2Marcus Møller Larsen (CBS: Copenhagen Business School)H-Index: 10
Last. Lucia Piscitello (Polytechnic University of Milan)H-Index: 26
view all 3 authors...
We explore when and why decision makers choose international entry modes (e.g., hierarchies or markets) that deviate from internalization theory’s predictions. By applying a cognitive perspective on entry mode decision making, we propose that the performance of prior international activities influences decision makers’ behavior in different ways than assumed in internalization theory. More specifically, due to a representativeness bias, underperforming (overperforming) past ventures influence th...
3 CitationsSource
#1Gabriel R. G. Benito (BI Norwegian Business School)H-Index: 25
#2Bent Petersen (CBS: Copenhagen Business School)H-Index: 27
Last. Lawrence S. Welch (Melbourne Business School)H-Index: 34
view all 3 authors...
In a research note in this issue, Strange and Humphrey discuss how a global value chain (GVC) approach serves to usefully move internalization theory towards a better understanding of the increasingly important ‘middle ground’ between markets and hierarchies in the contemporary highly globalized international business scene. After a brief recount of their main arguments, we argue that their discussion needs to the extended, as it does not adequately recognize important differences between intern...
4 CitationsSource
#1Elitsa R. Banalieva (NU: Northeastern University)H-Index: 12
#2Charles Dhanaraj (TU: Temple University)H-Index: 2
We study the internationalization of digital service multinational enterprises (SMNCs), focusing on how digitalization alters internalization theory’s assumptions about the nature of firm-specific assets (FSAs) and the theory’s predictions about governance choices in cross-border transactions. We invoke Simon’s (Proc Am Philos Soc 106(6):467–482, 1962) near-decomposability concept to explain how digitalization enables two distinct types of FSAs – technology and human capital. Applying the ideas ...
2 CitationsSource
#1Roger Strange (University of Sussex)H-Index: 25
#2John Humphrey (University of Sussex)H-Index: 33
In this paper, we suggest that internalization theory might be extended by incorporating complementary insights from GVC theory. More specifically, we argue that internalization theory can explain why lead firms might wish to externalize selected activities, but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their GVC partners. We advance an explanation linking the choice of control mechanism to two ...
14 CitationsSource
#1Jean-François Hennart (Tilburg University)H-Index: 42
#2Antonio Majocchi (UNIPV: University of Pavia)H-Index: 13
Last. Emanuele Forlani (UNIBO: University of Bologna)H-Index: 2
view all 3 authors...
The prevalent view among family-firm internationalization scholars is that family management discourages internationalization. This is because selling abroad is said to require more specialized managers and more resources than selling at home, and yet family firms are unwilling to recruit non-family managers with the required international skills and to dilute their control to obtain the necessary finance. We hypothesize that this argument overlooks the possibility that managers of family-manage...
21 CitationsSource
#1Christian Geisler Asmussen (CBS: Copenhagen Business School)H-Index: 14
#2Andrea Fosfuri (Bocconi University)H-Index: 27
Research Summary: Multinational enterprises (MNEs) invest significant resources in corporate social responsibility (CSR), but their attempts to build a global “social brand” may clash with the execution of operational strategies at a subsidiary level. Using a game‐theoretic model, this research addresses the complex interplay of different contingencies that shape the coordination and control challenges facing MNEs when they implement global CSR strategies, including brand spillovers, the risk of...
1 CitationsSource
Cited By11
Newest
#1Valentina De Marchi (UNIPD: University of Padua)H-Index: 14
#2Eleonora Di Maria (UNIPD: University of Padua)H-Index: 15
Last. Alessandra PerriH-Index: 7
view all 4 authors...
Abstract This article offers a comprehensive and systematic review of the literature on Global Value Chains (GVCs). The GVC framework has received growing attention in the last decade, providing theoretical concepts and analytical tools to understand and assess patterns of value creation in view of the new international division of labour. In this area, a broad overlap of research interest exists with the international business (IB) literature. Yet, few interactions between the two fields of stu...
Source
#1Wei YangH-Index: 2
#2Klaus E. MeyerH-Index: 43
Last. Klaus E. Meyer (UWO: University of Western Ontario)H-Index: 14
view all 2 authors...
When foreign and local firms compete, they face competitors acting quite differently from themselves. Specifically, their ability to engage in timely and frequent actions is influenced by, respectively, the Liability of Foreignness (LoF) and the Liability of Localness (LoL). We explore how the trade-off between LoF and LoL influences the aggressiveness of competitive actions firms take in emerging markets. Specifically, we argue that LoF results in weaker government ties that inhibit the aggress...
Source
Source
Abstract Multinational enterprise (MNE) subsidiaries abroad are important organizations in their own rights. They typically hold some of the MNE’s most critical resources, and operate at the forefront of complex international environments. In this review, we identify and organize theoretical and empirical research on subsidiary management based on over 600 articles in leading academic journals. We develop a conceptual framework that integrates complementary streams of theoretical and empirical r...
3 CitationsSource
#1Liena Kano (U of C: University of Calgary)H-Index: 11
#2Luciano Ciravegna (INCAE Business School)H-Index: 16
Last. Francesco RattalinoH-Index: 1
view all 3 authors...
This research note links insights from the family firm literature with extant internalization theory-based studies on family firm internationalization to explain how family-owned multinational enterprises (MNEs) can leverage family resources for successful internationalization, and why some family firms are unable to do so. We identify examples of internationally relevant resources contributed by the founding family, namely, social capital, long-term orientation, and reputation. We then differen...
Source
The article studies the problematic issues of essence and content of globalization process, directions and mechanisms of its impact on institutional structure of society. At the same time, globalization is viewed as a complex complicated and contradictory process not only increasing the dependence between socioeconomic and economic systems of individual countries, but also as a factor directly changing the course of development vector of institutional structures that sets a new trajectory of the...
Source
#1Khadija van der Straaten (UvA: University of Amsterdam)H-Index: 1
#2Niccolò Pisani (UvA: University of Amsterdam)H-Index: 6
Last. A. Kolk (UvA: University of Amsterdam)H-Index: 54
view all 3 authors...
Whereas IB has extensively studied MNEs’ generic (positive) impact on host economies, but rarely on employee wages, economics research has only shown an overall MNE wage premium. We ‘unravel’ this premium, considering multiple levels of analysis and accounting for host-country contextual contingencies, to unveil MNEs different (positive or negative) distributional effects. Using unique micro-level data from over 40,000 employees in 13 countries, we examine MNEs’ distributional effects for employ...
1 CitationsSource
The 2013 collapse of the Rana Plaza building in Dhaka, Bangladesh, led external stakeholders to insist on higher labor standards in apparel global value chains (GVCs). Stakeholders now expect MNEs to take ‘full-chain’ responsibility. However, the increased monitoring and enforcement costs of a large network of suppliers have been non-trivial. MNEs instead implement a ‘cascading compliance’ approach, coupled with a partial re-internalization. Elevated costs are further exacerbated in developing c...
8 CitationsSource
#1Alain Verbeke (Vrije Universiteit Brussel)H-Index: 49
#2Hadi Fariborzi (U of C: University of Calgary)H-Index: 1
We propose an analytical business history approach, informed by new internalisation theory, to study managerial governance adaptation in the multinational enterprise (MNE). We shed new light on the timing and the scale of managerial governance adaptation. These two issues have remained largely unaddressed in mainstream international business theory. We uncover the importance of delayed, larger-scale governance adaptation as a response to cumulative, localised commitment failures. We illustrate o...
1 CitationsSource
#1Jean-François Hennart (WU: Vienna University of Economics and Business)H-Index: 1
#1Jean-François Hennart (Polytechnic University of Milan)H-Index: 42
Banalieva and Dhanaraj argue that digital service multinationals (DSMNCs) possess a new category of firm-specific advantage (FSA), the network advantage, and that, contrary to extant theory, they use networks as a mode of governance. I review the business models used by DSMNCs, compare them to non-digital ones, and explore what we can learn about them from extant IB theory. I conclude that network advantages are not a new category of FSAs, that networks are not a mode of governance, and that the...
5 CitationsSource