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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 5: Trade and FDI revisited: the role of location

A Narrative of Theory and Practice

Robert Pearce

Extract

In terms of the broad theoretical prospectus (OLI) this chapter elaborates on location advantage, but does this through an exposition of the ideas of Kojima. The chapter presents the case of ‘trade-creating FDI’ (ES operations in NH-from Chapter 4) as reflecting the ability of MNEs (in a freer-trade context) to activate a country’s sources of ‘static comparative advantage’ as positive LAs, thereby generating enhanced efficiency and welfare and providing host economies with a strong impetus to growth and development. This is contrasted with the case of ‘trade-destroying FDI’ where a constrained international environment (trade barriers operating as negative LAs) generates the inefficiencies of MS operations in the MH.

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