Edited by Alain Verbeke and Hemant Merchant
Chapter 5: Dynamics of foreign operation modes and their combinations: insights for international strategic management
Companies’ choice of foreign operation modes (FOMs) has been a core subject of international business studies basically from its beginning (Hymer, 1960 ; Root, 1964). A half-century of research has brought us a set of established perspectives on companies’ FOM choices, the most important being the economics-based approaches of internalization and transaction cost theories (Anderson and Gatignon, 1986; Buckley and Casson, 1976; Hennart, 1982), evolutionary and resource-based approaches (Andersen, 1997; Kogut and Zander, 1993; Madhok, 1997), institutional approaches (Kostova and Zaheer, 1999; Meyer and Peng, 2005), and process models based on learning and decision behaviour theories (Johanson and Vahlne, 1977, 2009). The various approaches have been usefully summarized in comprehensive frameworks such as Dunning’s well-known OLI framework (ownership–location–internalization) and the eclectic framework proposed by Hill et al. (1990). Alongside conceptual developments there has also been a surge of empirical studies, especially from the mid-1980s when research templates emerged through the groundbreaking studies by Davidson and McFetridge (1985), Caves and Mehra (1986), Anderson and Coughlan (1987), Gatignon and Anderson (1988), Hennart (1988) and Kogut and Singh (1988); see also Kogut (2001). Several overview articles (Brouthers and Hennart, 2007; Canabal and White, 2008) and meta-analyses (Morschett et al., 2010; Tihanyi et al., 2005; Zhao et al., 2004) have been published recently, indicating that this has become a mature field of research. Well-established research templates and a dearth of innovative contributions indicate that the field has developed paradigm-like characteristics.
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