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The Multinational Enterprise

Theory and History

Mark Casson

This book summarises Mark Casson’s recent research on the multinational enterprise. This work is firmly rooted in history and examines the evolution of the internalisation theory of the multinational enterprise over the past forty years and, in the light of this, considers its potential for further development. The book also explores internationalisation theory in respect to marketing and brands, the supply chain, risk management as well as methodology.
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Chapter 2: Internalization theory: An unfinished agenda

Mark Casson, Lynda Porter and Nigel Wadeson


Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting, but this chapter extends it to the industry level. It synthesizes internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model that highlights the interdependencies between rival firms. Each firm responds to its rivals by jointly optimizing production and innovation through interdependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm.

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