Extending internalisation theory: From the multinational enterprise to the knowledge-based empire
Internalisation theory explains how the boundaries of firms are set at the margin where the advantages of internal coordination are just offset by the costs of supplanting external markets. Internalisation is a general principle that can be used to explain the boundaries of any institution in terms of the costs and benefits of alternative methods of coordination. As such, it applies to states as well as to firms. Within this broader context, multinational enterprises (MNEs) have an analogue in the imperial state. This paper develops a new theory of imperialism that is isomorphic to the internalisation theory of the MNE. This theory provides a set of insights which do not appear in any systematic way in earlier theories of imperialism. 1. Some states are more entrepreneurial than others because they provide strong incentives for individual discovery and innovation (e.g. promoting freedom, of travel, association and expression). 2. Newly discovered knowledge is a global public good; it is therefore efficient to apply it simultaneously in all territories to which it is relevant (e.g. apply the same mining technology in several different mineral-rich countries). 3. States have a role in supplying local public goods (e.g. law and order, transport and communications infrastructure, and certain types of health and education); they can also establish property rights and regulations under which private goods are provided by a private sector. Newly discovered knowledge about how to supply public goods can therefore be exploited by a state. 4. Although knowledge is a public good, there are obstacles to transferring it between locations. Foreigners may not accept the superiority of the knowledge; they may pass it on to the supplier's enemies; or they may not be able to absorb it because of limited education. A state may therefore encounter difficulty in exploiting its knowledge abroad through licensing agreements negotiated under treaty arrangements. 5. States possess military knowledge as well as civilian knowledge. The rule of law is weaker between states than it is within states. Superior military knowledge therefore permits a state to take over other territories by force. A knowledge-intensive state frustrated by barriers to knowledge transfer may therefore resort to force and take over (occupy or govern) territories controlled by other states (especially those that refuse to recognise its supremacy). 6. Knowledge obsolesces, and as it does so the strategic case for imperialism declines. These insights suggest that imperialism is a rational response to a specific set of circumstances. They suggest that in a world where opportunities to discover new knowledge arise continuously, imperialism emerges naturally wherever these circumstances prevail. Obsolescence too is a natural process, and this explains why empires decline. The decline of one empire may generate a gap that some other rising empire may be able to fill. The paper concludes by reviewing a panel of fourteen empires on which the theory can be tested using case study analysis.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (2009)
Issue (Month): 3 (June)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/bibliographic|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Perotti, Roberto & Spolaore, Enrico & Alesina, Alberto, 1995.
"Together or Separately? Issues on the Costs and Benefits of Political and Fiscal Unions,"
4553017, Harvard University Department of Economics.
- Alesina, Alberto & Perotti, Roberto & Spolaore, Enrico, 1995. "Togetheror separately? Issues on the costs and benefits of political and fiscal unions," European Economic Review, Elsevier, vol. 39(3-4), pages 751-758, April.
- Engerman, Stanley L., 1998. "British Imperialism in a Mercantilist Age, 1492–1849: Conceptual Issues and Empirical Problems," Revista de Historia Económica, Cambridge University Press, vol. 16(01), pages 195-231, March.
- Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
- Jean J Boddewyn, 1988. "Political Aspects of MNE Theory," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 341-363, September.
When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:18:y:2009:i:3:p:236-256. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.