International Handbook on the Economics of Integration, Volume III
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International Handbook on the Economics of Integration, Volume III

Factor Mobility, Agriculture, Environment and Quantitative Studies

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Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 4: Multinational Enterprises and Regional Economic Integration: Rethinking Key Metrics in International Business

Alan M. Rugman and Chang Hoon Oh

Extract

4 Multinational enterprises and regional economic integration: rethinking key metrics in international business Alan M. Rugman and Chang Hoon Oh 1 INTRODUCTION This handbook serves as a useful occasion to take stock of the literature in international business (IB) as it affects international economic integration. We shall examine the nature of regional economic integration achieved by the world’s 500 largest firms, as observed by Rugman (2005). In particular, we demonstrate in this chapter that it is necessary to rethink aspects of the linkage between IB theory and some of the prevailing empirical metrics used in the field. It is argued that there is an unrecognised disparity between country-level theories of foreign direct investment (FDI) and firm-level data on multinationality and performance. We approach this difficult task from the perspective of Karl Popper (1959). We believe that good theory will be developed only by a deductive approach which builds upon the relevant empirical evidence. Therefore, in order to review and analyse IB theories, and to develop new aspects of IB theories, we need to address the related empirical literature on a parallel plane in order to detect complementarities between theory and empirical work. This chapter is structured as follows. Section 2 examines the role of multinational enterprises (MNEs) in IB research. Section 3 attempts to link IB theory to empirical research. Section 4 addresses theoretical problems with empirical metrics. Section 5 evaluates two metrics of multinationality: scale and scope. Section 6 examines new tests of multinationality. Finally, Section 7 concludes. 2...

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