New Horizons in International Business series
Edited by Masaaki Kotabe and Preet S. Aulakh
Chapter 4: Global Financial Markets and Global Firms: Implications for International Business Research
4. Global ﬁnancial markets and global ﬁrms: implications for international business research Jongmoo Jay Choi Concomitant with the globalization of ﬁrms, there has been a rapid globalization of markets. In fact, global markets are necessary and sufﬁcient conditions for global ﬁrms. Global markets provide opportunities for ﬁrms to go abroad, while global ﬁrms induce the markets to globalize. At the same time, globalization entails risk, as well as opportunity, for ﬁrms and investors. What then are the implications of global ﬁnancial markets for ﬁrms, and how is globalization achieved for ﬁrms and markets? Despite its importance, the nexus between global ﬁnancial markets and global ﬁrms has not been a core area of research in mainstream international business literature. In international business literature, the major emphasis has been on the strategic, cultural, and behavioral dimensions of ﬁrms. For instance, although the original industrial organization view of foreign direct investments (FDIs) of Caves (1971), Hymer (1976), and Kindleberger (1969) does include imperfect ﬁnancial markets as one of the necessary assumptions for multinational ﬁrms and FDIs, most empirical work in the tradition of Dunning (1980) makes little reference to ﬁnancial or market variables. Mainstream research in international ﬁnance, on the other hand, has focused on portfolio and asset pricing issues from the standpoint of investors and markets, or those that ‘internationalize’ a particular domestic ﬁnance topic. Advances that incorporate strategic factors in corporate ﬁnancial decisions in a global context have been scant. To some extent, this reﬂects the development of international...
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