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Discussion Paper Series
Fifty Years of International Business Theory and Beyond FIFTY YEARS OF INTERNATIONAL BUSINESS THEORY AND BEYOND

A. Rugman University of Reading, UK A. Verbeke University of Calgary, Canada Q. Nguyen University of Reading, UK

The aim of this series is to disseminate new research of academic distinction in the fields of international business and strategy. Papers are preliminary drafts, circulated to stimulate discussion and critical comment. Publication in the series does not imply that the content of the paper reflects the views of Henley Business School, the John H. Dunning Centre or the University of Reading.

John H. Dunning Centre for International Business Discussion Paper No. 2011-001 June 2011

dunning@henley.reading.ac.uk www.henley.reading.ac.uk/dunn
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FIFTY YEARS OF INTERNATIONAL BUSINESS THEORY AND BEYOND

Alan M. Rugman (Corresponding author) Professor of International Business Henley Business School, School of Management University of Reading Henley on Thames, Oxon, RG9 3AU, England E-mail: a.rugman@henley.reading.ac.uk

Alain Verbeke Professor of Strategy and Global Management McCaig Chair in Management Haskayne School of Business University of Calgary

Quyen T.K. Nguyen Henley Business School, School of Management University of Reading

Submitted to Global Strategy Journal Acknowledgements: we are pleased to acknowledge helpful comments from two referees, and from Professors Peter Buckley, Mark Casson, Michael-Joerg Oesterle, and Joachim Wolf. We also received helpful comments from participants at seminars at the University of Leeds, York University and the University of Reading. Version: March 31, 2011 ‚Accepted for publication in Management International Review, volume 51, 2011‛ 2

ABSTRACT

As the field of international business has matured, there have been shifts in the core unit of analysis. First, there was analysis at country level, using national statistics on trade and foreign direct investment (FDI). Next, the focus shifted to the

multinational enterprise (MNE) and the parent’s firm specific advantages (FSAs). Eventually the MNE was analysed as a network and the subsidiary became a unit of analysis. We untangle the last fifty years of international business theory using a classification by these three units of analysis. This is the country-specific advantage (CSA) and firmspecific advantage (FSA) matrix. Will this integrative framework continue to be useful in the future? We demonstrate that this is likely as the CSA/FSA matrix permits integration of potentially useful alternative units of analysis, including the broad region of the triad. Looking forward, we develop a new framework, visualized in two matrices, to show how distance really matters and how FSAs function in international business. Key to this are the concepts of compounded distance and resource recombination barriers facing MNEs when operating across national borders.

Keywords: multinational enterprises (MNEs); firm specific advantages (FSAs); country specific advantages (CSAs); compounded distance; subsidiary; network; regions; resource recombination barriers; theory

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INTRODUCTION In this paper, we examine the literature on international business (IB) over the last fifty years. We do this in the first three sections. In the second half of the paper, we develop new frameworks to analyze unresolved issues in the theoretical and empirical literature of IB that will require research in the future. As the field of IB has matured, there have been shifts in the core unit of analysis. In the pre-Hymer (1960) era, international economists dominated the field and focused on national competitiveness at the country level, using national statistics on trade and foreign investment. During the 1970s, the focus shifted to foreign direct investment by the multinational enterprise (MNE) and the transfer across borders of its firm specific advantages (FSAs), both stand-alone competences...
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