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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 9: Evaluating the multinational: a coda

A Narrative of Theory and Practice

Robert Pearce

Extract

A principal objective of the approaches to IB provided in the book is to comprehend and evaluate the behaviour of the MNE as a defining player in the global economy. This concluding chapter provides a framework for evaluating the MNE in terms of four broad generic issues that address different dimensions of the implications of its behaviour. The chapter elaborates these four issues and demonstrates how the analytical approaches of the earlier chapters can help articulate the relevant potentials and problems of MNE behaviour. (i) Efficiency: an issue in static optimisation. Do MNEs, seeking the most effective use of their current sources of competitiveness, improve the efficiency with which the resource capacities of host economies are utilised? Or do they compromise the use of such resources; generate avoidable inefficiencies and lower welfare? (ii) Distribution: given that the outcomes of MNE operations (efficient or inefficient) are actually generated by a combination of their competences and host-country resources, are such benefits/penalties fairly distributed between the participants? The theoretical difficulty of articulating what would, in practice, be a fair outcome is seen to underline why the issue persists as an unresolved controversy in aspects of political economy. (iii) Sovereignty: argues that the sheer power and organisational flexibility of MNEs gives them the scope to undermine the decision-making/policy-execution sovereignty of national governments. The potential for the presence of asymmetrical knowledge in bargaining processes is suggested as sources of such compromising scopes in MNEs. (iv) Growth and Development: alongside current efficiency both MNEs and national economies seek sources of future improvement (that is, growth and development). The chapter explores in some detail the ways in which MNEs behaviour may support or compromise the extent and form of national economic progress.

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