The Selected Essays of John H. Dunning, Volume I
Chapter 1: The Determinants of International Production
* INTRODUCTION There are few branches of economic analysis which are not directly relevant to an understanding of the origin and growth of multinational enterprises (MNEs). The subject is obviously of interest to those concerned with the resource allocative activities and financial management of firms, and with the theory of industrial organization. Since their operations straddle national boundaries, and involve trade in both goods and factors of production, they come within the scope of international economics; and as vehicles for the transference of new skills and technologies, they are no less pertinent to the theory of economic development. The sharing of the costs and benefits of their activities between the countries in which they operate raises complex and fascinating issues for the welfare economist. The geographical flexibility of their procurement, production, and marketing strategies adds a new dimension to the theories of industrial relations and collective bargaining; while their operations are not only influenced by, but help to fashion, a whole range of monetary and fiscal policies used by national governments to advance economic and social goals. I make these observations by way of introduction because, in interpreting the various explanations of the origin and growth of international business, one is very conscious of the particular interests of the researcher. This is shown both in the type of questions asked, and the approach and techniques used to answer them. The questions ‘why do firms invest overseas?’, ‘where do firms locate their foreign operations?’ and ‘what determines the amount and...
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