Theory and Practice
New Horizons in International Business series
Chapter 2: General Theory of Banking Internationalization
INTRODUCTION The expansion of services FDI in recent years has stimulated the search for theoretical development of service multinational enterprises. However do we really need a ‘new’ theory for service MNEs? The answer very much depends on the distinctions between services and goods MNEs. Many researchers believe that service ﬁrms do not diﬀer fundamentally from the manufacturing ﬁrms (Gray and Gray, 1981; Casson, 1990; Buckley et al., 1992; Williams, 1997). Therefore theories derived from manufacturing MNEs can be applied to explain service internationalization. As more service functions become directly tradable, international production systems involving services are being established. Advances in information and communications technologies facilitate trade in services as they make it unnecessary for providers and users to be close to one another. Information can nowadays be easily digitized and sent across the world at negligible cost. These new technologies also allow services to be split into components, each of which can be located in countries that can provide them most eﬃciently. As a result, IT-enabled services or service functions are now increasingly globalizing in the same way as manufactures have been for several decades. For instance, HSBC established its global call center in India and global data processing center in Shanghai and Guangzhou, China. Although most services FDI, such as ﬁnance, retailing and telecommunications, have been driven by host country market-seeking motives, the situation is changing. This chapter provides a theoretical examination of service internationalization, which therefore provides a theoretical foundation for researching multinational banking in China....
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