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Emerging Issues in International Business Research

Edited by Masaaki Kotabe and Preet S. Aulakh

Top scholars in the field of international business (IB) contribute to this comprehensive analysis of the current state-of-the-art in IB research. The focus of the book is to examine the current state of international business research from an issue-oriented approach rather than the functional approaches that have been characteristic in the recent evolution of the field. In evaluating the current state and future research directions in research areas unique to international business, the book is structured in three parts: the macro-environment, interactions between business and institutions, and competition and strategy.
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Chapter 4: Global Financial Markets and Global Firms: Implications for International Business Research

Jongmoo Jay Choi


4. Global financial markets and global firms: implications for international business research Jongmoo Jay Choi Concomitant with the globalization of firms, there has been a rapid globalization of markets. In fact, global markets are necessary and sufficient conditions for global firms. Global markets provide opportunities for firms to go abroad, while global firms induce the markets to globalize. At the same time, globalization entails risk, as well as opportunity, for firms and investors. What then are the implications of global financial markets for firms, and how is globalization achieved for firms and markets? Despite its importance, the nexus between global financial markets and global firms has not been a core area of research in mainstream international business literature. In international business literature, the major emphasis has been on the strategic, cultural, and behavioral dimensions of firms. For instance, although the original industrial organization view of foreign direct investments (FDIs) of Caves (1971), Hymer (1976), and Kindleberger (1969) does include imperfect financial markets as one of the necessary assumptions for multinational firms and FDIs, most empirical work in the tradition of Dunning (1980) makes little reference to financial or market variables. Mainstream research in international finance, on the other hand, has focused on portfolio and asset pricing issues from the standpoint of investors and markets, or those that ‘internationalize’ a particular domestic finance topic. Advances that incorporate strategic factors in corporate financial decisions in a global context have been scant. To some extent, this reflects the development of international...

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