Internalisation Theory and outward direct investment by emerging market multinationals

The rise of multinational enterprises from emerging countries (EMNEs) poses an important test for theories of the multinational enterprise such as internalisation theory. It has been contended that new phenomena need new theory. This paper proposes that internalisation theory is appropriate to analyse EMNEs. This paper examines four approaches to EMNEs—international investment strategies, domestic market imperfections, international corporate networks and domestic institutions—and three case studies—Chinese outward FDI, Indian foreign acquisitions and investment in tax havens—to show the enduring relevance and predictive power of internalisation theory. This analysis encompasses many other approaches as special cases of internalisation theory. The use of internalisation theory to analyse EMNEs is to be commended, not only because of its theoretical inclusivity, but also because it has the ability to connect and to explain seemingly desperate phenomena

The institutional origins and evolution of dynamic capabilities in multinational enterprises

This article argues that a focus on the institutional underpinnings of multinational enterprise (mne) strategy and behavior is not only consistent with the emerging literature on dynamic capabilities, but it also serves to highlight the unique role played by mnes in generating new organizational routines by combining locally embedded capabilities with those that are mobile across borders. Firms shape markets rather than the other way around, because of the role organizational innovation plays in redefining the rules of selection in the operating environment. Of such innovations, some proportion will remain proprietary, while others become diffused more widely in the industry, as the choices made by pioneering firms are imitated by others. We argue that the combination of increasing interconnections between geographically dispersed markets and the greater use of market-based transactions have intensified the incentives for mnes to engage in the development of new routines, and to formalize them into transferable practices. This is likely to increase the overall transparency of the origins of firm capabilities, leading potentially to more specialization and less internalization at the industry level

An evolutionary appraoch to understanding international business activity: The co-evolution of MNEs and the instiutional environment

This paper examines the co-evolution of mne activities and institutions external and internal to the firm. We develop a theoretical framework for this analysis that draws on the more recent writings of douglass north on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness, and of richard nelson on the co-evolution of technology and institutions. We link historical changes in the character of mne activities to changes in the institutional environment, and highlight the scope for firm-level creativity and institutional entrepreneurship that may lead to co-evolution with the environment. We argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of mne subsidiaries. Thus mne agency derives from more decentralized forms of experimentation in international corporate networks, which competence-creating nodes of new initiatives can co-evolve with local institutions. Unlike most other streams of related literature, our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms. This form of co-evolutionary analysis is increasingly important to understanding the interrelationships between mne activities and public policy