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The Theory of International Business: The Role of Economic Models

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  • Mark Casson

    (University of Reading)

Abstract

This paper reviews the scope for economic modelling in international business. It argues for a multi-level theory based on classical internalisation theory. The theory extends the ‘systems approach’ to the multinational enterprise in which modular activities, such as production, marketing and R&D, are linked by flows of semi-processed products and proprietary knowledge. It is shown how this theory can be extended from the firm level to the industry level in order to analyse inter-firm co-operation and rivalry. The theory can be extended to higher levels (e.g., the global economy) and lower levels (e.g., personal relationships within plants and offices).

Suggested Citation

  • Mark Casson, 2018. "The Theory of International Business: The Role of Economic Models," Management International Review, Springer, vol. 58(3), pages 363-387, June.
  • Handle: RePEc:spr:manint:v:58:y:2018:i:3:d:10.1007_s11575-018-0342-6
    DOI: 10.1007/s11575-018-0342-6
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    References listed on IDEAS

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Mark Casson, 1979. "Alternatives to the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-04645-4.
    3. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0.
    4. Casson, Mark, 2016. "Alan Rugman’s methodology," International Business Review, Elsevier, vol. 25(3), pages 758-766.
    5. Peter J. Buckley & Mark Casson, 2010. "Models of the Multinational Enterprise," Palgrave Macmillan Books, in: The Multinational Enterprise Revisited, chapter 7, pages 147-176, Palgrave Macmillan.
    6. Peter J. Buckley & Mark Casson, 2010. "Analysing Foreign Market Entry Strategies: Extending the Internalisation Approach," Palgrave Macmillan Books, in: The Multinational Enterprise Revisited, chapter 8, pages 177-204, Palgrave Macmillan.
    7. John H. Dunning, 1977. "Trade, Location of Economic Activity and the MNE: A Search for an Eclectic Approach," Palgrave Macmillan Books, in: Bertil Ohlin & Per-Ove Hesselborn & Per Magnus Wijkman (ed.), The International Allocation of Economic Activity, chapter 12, pages 395-418, Palgrave Macmillan.
    8. Peter J. Buckley & Mark Casson, 1985. "The Economic Theory of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-05242-4.
    9. Cheung, Steven N S, 1969. "Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 23-42, April.
    10. Mark Casson, 1985. "Multinational Monopolies and International Cartels," Palgrave Macmillan Books, in: The Economic Theory of the Multinational Enterprise, chapter 4, pages 60-97, Palgrave Macmillan.
    11. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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    13. Morgan,Mary S., 2012. "The World in the Model," Cambridge Books, Cambridge University Press, number 9781107002975, October.
    14. Morgan,Mary S., 2012. "The World in the Model," Cambridge Books, Cambridge University Press, number 9780521176194, October.
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    Cited by:

    1. Peter Buckley & Mark Casson, 2019. "Decision-making in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1424-1439, October.
    2. Aruna Gounder & Rod Falvey & Gulasekaran Rajaguru, 2019. "The Effects of Preferential Trade Agreements on Foreign Direct Investment: Evidence from the African Caribbean Pacific Region," Open Economies Review, Springer, vol. 30(4), pages 695-717, September.

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