Multinationals and Industrial Competitiveness

Multinationals and Industrial Competitiveness

A New Agenda

New Horizons in International Business series

John H. Dunning and Rajneesh Narula

This book offers an important contribution to the contemporary debate on the role of multinational enterprises (MNEs) in economic development in an increasingly globalizing, knowledge-intensive and alliance-based world economy.

Chapter 9: Relational Assets: The New Competitive Advantages of MNEs and Countries

John H. Dunning and Rajneesh Narula

Subjects: business and management, international business, economics and finance, international business

Extract

INTRODUCTION Most paradigms and economic theories of the determinants of international business (IB) activities, and particularly those designed to explain the extent, composition and geography of foreign owned production, are essentially asset based. By assets, we mean the accumulated stock of the resources and capabilities of firms which, potentially at least, are capable of generating a future income stream and/or an augmentation to that stock. The IB literature1 usually distinguishes between three kinds of assets (see Table 9.1): 1. those specific and unique to particular multinational enterprises (MNEs),2 or potential MNEs: these may be located in the home country of the MNEs, or in the countries which are host to their affiliates; 2. those which are external to MNEs, but are accessed and then deployed by them: these assets may likewise be located in the home country of the MNEs or in foreign countries; 3. those which encompass the organizational form by which these two kinds of assets are harnessed, created and coordinated by the management of MNEs, whether exercised by the parent companies or by their foreign affiliates. As set out in Table 9.2, over the years, the content, relative significance and governance of these different types of assets have changed. Until the industrial revolution, the critical wealth-creating assets were of two kinds. The first consisted of land and property owned mainly by households, and the way in which these assets were husbanded. The second comprised the capital, entrepreneurship and markets owned, accessed or exploited...

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