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The International Firm: A Vehicle for Overcoming Barriers to Trade and a Global Intelligence Organization Diffusing the Notion of a Nation

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  • Eliasson, Gunnar

    (Research Institute of Industrial Economics (IFN))

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    Abstract

    The multinational firm (MNF) is introduced as the intersection between trade theory and the theory of the firm. I show that economies of scale associated with various knowledge inputs have made it possible for firms to grow large through internationalization and, once large, staying competitive and large. Internationalization is a technique of both overcoming barriers to trade, and of efficient learning to stay competitive. International firms are increasingly becoming large and highly mobile carriers of industrial knowledge embodied in teams of humans. With barriers to trade and factor movements further reduced in Europe the first reason for globalization will decrease for firms located inside the internal market, but intensified technological competition will make the second factor increasingly important, constantly shifting the intelligence locus of the business organization to the markets where the most advanced industrial knowledge is being exhibited in competition. Europe will become such a locus of competition and competence allocation to the extent "it" lives up to its ambition to deregulate markets, and especially the markets for ownership and control. In general global markets are seen as a vast source of business opportunities and the firm as a local source of competence to exploit the opportunities.

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    Bibliographic Info

    Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 201.

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    Length: 40 pages
    Date of creation: Dec 1988
    Date of revision:
    Handle: RePEc:hhs:iuiwop:0201

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    Related research

    Keywords: Multinational firms; trade barriers; international trade; economies of scale;

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    References

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    1. Teece, David J., 1986. "Transactions cost economics and the multinational enterprise An Assessment," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 21-45, March.
    2. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    3. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    4. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    5. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
    6. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    7. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    8. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    9. Eliasson, Gunnar, 1986. "International Competition, Productivity Change and the Organisation of Production," Working Paper Series 154, Research Institute of Industrial Economics.
    10. Caves, Richard E., 1985. "International trade and industrial organization: Problems, solved and unsolved," European Economic Review, Elsevier, vol. 28(3), pages 377-395, August.
    11. Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
    12. Dunning, John H, 1973. "The Determinants of International Production," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 289-336, November.
    13. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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