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The Development of International Business

A Narrative of Theory and Practice

Robert Pearce

In this wide-ranging and groundbreaking new book, Robert Pearce provides an analytically-informed basis for understanding the modern multinational enterprise. It does this by tracing the development over the past half-century of two parallel strands of analysis in International Business; designated as the ‘theoretical’ and the ‘practical’. The book shows how the practical restructuring of the MNE as an organisational form has responded to changes in the wider global economy and how this evolution has interfaced with the enriching of the relevant theorising. By tracing the persisting dynamics of the MNEs’ structure and strategic positioning it demonstrates how what it is now can be used as a template for understanding and organising its further evolution as additional changes condition its environment.
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Chapter 2: From FDI to the MNE: Hymer and the roots of ownership advantage

A Narrative of Theory and Practice

Robert Pearce

Extract

Firstly outlines aspects of Hymer’s critique of the macro-level theory of FDI. Then points to how elements of this critique point not only to the need for a ‘new’ micro-level theory of the MNE but also how they feed directly into aspects of this new theory; FDI requires firms with unique sources of firm-specific competitiveness (Dunning’s ownership advantages); it is most likely to occur in concentrated market structures. Proceeds to develop the concept of OAs; usually these are intangible attributes that are expensive to create and inexpensive to use once possessed. Then shows how this can feed into the model of MNEs’ prevalence in concentrated-industry markets and to oligopoly-based competition.

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