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Mark Casson, Lynda Porter and Nigel Wadeson

Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting, but this chapter extends it to the industry level. It synthesizes internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model that highlights the interdependencies between rival firms. Each firm responds to its rivals by jointly optimizing production and innovation through interdependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm.

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Peter Buckley and Mark Casson

Introducing marketing explicitly into the internalization theory of the multinational enterprise considerably extends the power of the theory. In particular, it enables a comparison of marketing-led and technology-led multinationals, and highlights the benefits of collaboration between them. It facilitates the analysis of outsourcing, and in particular of R & D. It highlights the importance to marketing-led firms of owning product rather than facilities. The analysis addresses key issues relating to ‘hollow firms’, ‘flagship firms’ and the ‘global factory’.

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Mark Casson and Nigel Wadeson

This chapter proposes a new way of resolving some outstanding issues in international business (IB) theory by building upon recent work on global supply chains and the ‘systems view’ of IB. It views the multinational enterprise (MNE) as a coordinator of international supply chains, and reformulates IB theory in this context. This approach clarifies the logical structure of IB theory and reveals precisely where the conflicts and ambiguities lie.

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Mark Casson and Nigel Wadeson

This chapter offers an integrated analysis of outsourcing, offshoring and foreign direct investment within a systems view of international business. This view takes the supply chain rather than the firm as the basic unit of analysis. It argues that competition in the global economy selects supply chains that maximize the joint profit of all the firms in the chain. The systems view is compared with the firm-centred view commonly used in strategy literature. The chapter shows that a firm’s strategy must be embedded within an efficient supply chain strategy, and that this strategy must be negotiated with, rather than imposed upon, other firms. The chapter analyses the conditions under which various supply chain strategies – and by implication various firm-level strategies – are efficient. Only by adopting a systems view of supply chains is it possible to determine which firm-level strategies will succeed in a volatile global economy.

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Teresa da Silva Lopes and Mark Casson

This chapter focuses on the protection and counter-imitation strategies British multinationals used to defend the reputation of their brands globally in the period 1870–1929, and shows how crucial these strategies were in their survival and success. Despite new trademark legislation in the 1880s, enforcement of trademarks remained expensive, and many firms preferred negotiation to prosecution. Many imitators were based in the newly industrializing countries of the time – the United States, Germany and Japan. Imitators were often part of British export supply chains, as licensees, franchisees or wholesalers. British firms responded by lobbying governments, appointing local agents to provide intelligence, and collaborating with other firms.

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Mark Casson and Teresa da Silva Lopes

This chapter examines why some foreign investors enter high-risk environments that other investors avoid. It considers why the success of these firms often fails to encourage other firms to enter. It identifies risk-management skills that some investors possess but many others lack. These skills allow firms to devise and implement measures to prevent and mitigate adverse outcomes. It offers a typology of risky situations and shows how different combinations of risk management strategies can be used to control them. The behaviour of successful foreign investors in high-risk environments can therefore be explained in terms of specific host-country risk factors and the capabilities of firms in managing the risks associated with them.

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Mark Casson and Teresa da Silva Lopes

Since the banking crisis of 2008 the global economy is perceived as riskier than before. Flows of foreign direct investment (FDI) have contracted, and firms that cannot manage risks have withdrawn from countries in which they previously invested. These problems are not new. For centuries, firms have invested in risky foreign environments. This chapter reviews the risk management strategies of foreign investors, using archival evidence and secondary sources. It distinguishes the different types of risks that investors face and the different strategies by which risks can be managed.

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The Multinational Enterprise

Theory and History

Mark Casson

This book summarises Mark Casson’s recent research on the multinational enterprise. This work is firmly rooted in history and examines the evolution of the internalisation theory of the multinational enterprise over the past forty years and, in the light of this, considers its potential for further development. The book also explores internationalisation theory in respect to marketing and brands, the supply chain, risk management as well as methodology.
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Mark Casson

This chapter is based on an unpublished paper presented at a plenary session on 40 years of internalization theory at a conference in Vienna  in December 2016. It examines the evolution of the internalization theory of the multinational enterprise over the past 40 years and, in the light of this, considers its potential for further development. The existing theory represents a synthesis of different strands of research, underpinned by a common set of economic principles. Its focus is on the global economy, and a representative global industry, rather than just the individual firm. The chapter shows how the existing theory can be extended to fulfil the ultimate ambition of early theorists, which was to analyse the boundaries of firms in an oligopolistic global industry.

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Mark Casson

Offshoring and outsourcing in global value chains have been extensively analysed from a strategic management perspective. This chapter examines these issues from an internalization theory perspective by summarizing the contribution of internalization theory to supply chain analysis; considering how a division of labour is coordinated and comparing coordination by management with coordination by the market; and discussing the formal models of supply chains developed by economists. Supply chain researchers possessing an interest in economic principles and good mathematical skills can make an important contribution to internalization theory, and it is hoped that this chapter will encourage them to do so.