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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 9: Networks in International Business

Mark Casson


9.1 INTRODUCTION Entrepreneurship is widely recognized as a key factor in economic growth (Leibenstein, 1968). Historical studies of commercialization and industrialization suggest that the speed of ‘take-off’ is higher when entrepreneurs in related lines of activity work well together (Grassby, 1995). In the aggregate, entrepreneurs may work better as a co-operative network than as a collection of competitive individualists. Unfortunately, attempts to develop the idea of an ‘entrepreneurial network’ encounter the difficulty that both ‘entrepreneur’ and ‘network’ are somewhat nebulous concepts. Using economic theory, however, it is possible to define them in a more rigorous manner. This chapter elucidates the concept of an entrepreneurial network, distinguishes different levels of entrepreneurial network, and shows how these different levels have interacted historically to promote growth in the international economy. The chapter is in three main parts. The first part analyses the concept of a network. The second discusses entrepreneurship, while the final part examines different types of entrepreneurial network, and considers the factors that influence their structure and their location. 9.2 AN ECONOMIC APPROACH TO NETWORKS Until recently, economists assumed that competitive markets could handle information in a costless manner, failing to recognize that, whatever kind of institution is involved, information-processing incurs substantial costs. Moreover, to explain why people compete so readily, economists assumed that material greed was the dominant human motive. Recent research has sought to remedy these weaknesses (Casson, 1995). Information costs have been incorporated into decision-making using the theory of teams (Carter, 1995), and ethical constraints...

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