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Economics of International Business

A New Research Agenda

Mark Casson

Economics of International Business sets out a new agenda for international business research. Mark Casson asserts that it is time to move the subject on from sterile debates about transaction cost economies and resource-based theories of the firm. Instead of focusing on the individual firm, the new agenda focuses on the global systems view of international business. A static view of the firm’s environment is replaced by a dynamic view which highlights the volatility of the international business environment. Coping with volatility requires entrepreneurial skills, flexibility and the need to synthesize information on a global basis. To co-ordinate the global system properly, entrepreneurs must co-operate through social networks of trust, as well as competing. Constructing a network of joint ventures, it is argued, is simply not enough.
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Chapter 3: The Boundaries of Firms: A Global Systems Perspective

Mark Casson


3. The boundaries of firms: a global systems perspective 3.1 INTRODUCTION This chapter analyses the boundaries of the firm from a system-wide perspective. It re-examines some of the issues raised in the previous chapter. New hypotheses are generated by situating the previous analysis within a systems approach. In the previous chapter the unit of analysis was the individual firm. In the present chapter the unit of analysis is the global economy. The analysis predicts not only where the boundaries of any given firm will be drawn, but how many firms there will be, and where their boundaries will interface with one another. Despite the frequent references to ‘globalization’ within the IB literature, a coherent account of the economic structure of the global economy is hard to find. When they appeal to formal models, IB scholars tend to cite standard economic theories of international trade: these may be theories of factor substitution, such as the Heckscher–Ohlin–Stolper–Samuelson theory (see for example, Kemp, 1964), or the theories of strategic trade policy based on transport costs and increasing returns to scale (Helpman and Krugman, 1985). It is well known, however, that such theories focus upon industries rather than firms. To take a systems view of the MNE it is necessary to disaggregate the global economy from the industry level to the level of the individual production facilities. In this chapter the global economy is portrayed as a collection of facilities linked together by a complex web of product and knowledge flows....

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