International Business

Economics of International Business: A New Research Agenda by Mark Casson

By Mark Casson

Economics of overseas company units out a brand new time table for foreign company examine. Mark Casson asserts that it's time to flow the topic on from sterile debates approximately transaction fee economies and resource-based theories of the company. rather than concentrating on the person enterprise, the hot schedule makes a speciality of the worldwide structures view of overseas company. A static view of the firm's setting is changed by way of a dynamic view which highlights the volatility of the foreign enterprise setting. dealing with volatility calls for entrepreneurial talents, flexibility and the necessity to synthesize details on an international foundation. To co-ordinate the worldwide approach competently, marketers needs to co-operate via social networks of belief, in addition to competing. developing a community of joint ventures, it really is argued, is absolutely not adequate. development on his past booklet, The association of foreign enterprise, Mark Casson exhibits that with appropriate ameliorations, the tools of economics can be utilized to investigate all of those matters in a rigorous approach. The instruments of 'business procedure' are too clumsy to handle the extra refined concerns, whereas descriptive methods fail to convey key concerns into sharp reduction. This ebook is crucial studying for all researchers and practitioners within the overseas enterprise box in addition to economists and lecturers alike.

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Flowers (1976) and Graham (1978) emphasized ‘exchange of threats’ in their respective studies of European and Canadian investment in the US, and two-way investment between the US and Europe. Yu and Ito (1988) more recently examined oligopolistic reaction and FDI in the US tyre and textiles industries. Graham (1992) laments the lack of attention to competitive structure in the international business literature, where the entrant is effectively a monopolist (Buckley and Casson, 1981). Indeed, Casson’s (1985) study of cartelization versus multinationalization is one of the few economic models of multinational industrial organization available.

Under a subcontracting arrangement the entrant and the rival remain potential competitors in the final product market, since each has their own distribution facility. Any attempt by the entrant to charge the full monopoly price would encourage the rival to switch to producing its own output instead. The entrant must persuade the rival not to compete by reducing its price to a ‘limit price’ p2 < p1, at which it just pays the rival to keep its distribution facility out of the industry. Under a franchising arrangement the local rival retains the option of switching back to supplying its distribution facility from its own production plant.

Closer examination of the issues suggests that this is not normally the best approach, however. The model 26 Economics of international business suggests that a combination of a wholly-owned production hub supplying IJV distribution facilities in each national market is a better solution. A hub facility is too critical to global strategy to allow a partner to become involved, because the damage they could do is far too great. Even with a wholly-owned hub facility, the combination still affords considerable flexibility to divest or withdraw from any single market.

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