A New Research Agenda
Chapter 2: Foreign Market Entry: A Formal Extension of Internalization Theory
with Peter J. Buckley 2.1 INTRODUCTION Empirical studies of FDI have become much more ambitious in scope over the last 30 years. In the 1960s the main focus of the Hymer–Kindleberger theory (Hymer, 1976; Kindleberger, 1969) and the product cycle theory (Vernon, 1966) was exporting versus FDI. In the 1970s the internalization approach identiﬁed licensing, franchising and subcontracting as other strategic options. The resurgence of mergers and acquisitions in the 1980s – often as a ‘quick ﬁx’ route to globalization – highlighted the choice between greenﬁeld ventures and acquisitions. At the same time, the growing participation of US ﬁrms in international joint ventures (IJVs) drew attention to the role of co-operative arrangements. In the 1990s the role of FDI in ‘transitional’ or ‘emerging’ economies (East and Central Europe, China, Vietnam, and so on) has brought back into focus some of the classic issues of the 1960s: the ‘costs of doing business abroad’ and the importance of ‘psychic distance’. It has renewed interest in the general question of why some modes of entry offer lower costs than others, and of why certain circumstances seem to favour certain modes over others. Linking all these issues together generates a high degree of complexity. Although the eclectic theory has been regularly revised and updated to accommodate the changing foci of applied research, it is too much of a ‘paradigm’ or ‘framework’ and too little of a ‘model’ to provide detailed advice on research design and hypothesis testing (Dunning, 1980). Complexity appears to have...
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