Internationalization Theory and Its Impact on the Field of International Business

Internalization Theory and its Impact on the Field of International Business

Alan M. Rugman and Alain Verbeke

Abstract
Internalization theory explains the existence and functioning of the multinational enterprise. It contributes to understanding the boundaries of the MNE, its interface with the external environment and its internal organizational design. Much work in the international strategic-management sphere has unfortunately not taken on board internalization-theory thinking and lacks the insights provided by this comparative institutional approach. In this chapter we show hoe well-known international strategic management models could be enriched and their normative implications altered by adopting an internalizing-theory lens.

Introduction
In this chapter we examine several international strategic management models revisited through an internalization theory lens. Internalization theory explains the existence and functioning of the multinational enterprise (MNE), (Rugman 1981). It contributes to understanding the boundaries of the MNE, its interface with the external environment, and its internal organizational design. Conventional internalization theory has focused primarily on explaining which parameters would stimulate firms to expand across borders, and on entry mode choice. More recent internalization theory extensions have focused on establishing linkages with strategic management perspectives on the MNE, and on describing differentiated network MNEs. The great strength of internalization theory is its comparative institutional approach to assessing the efficiency and effectiveness of MNE choices in the realm of choosing firm boundaries, establishing linkages with the external environment and selecting a specific organizational form. Much work in the international strategic management sphere has unfortunately not taken on board internalization theory thinking, and lacks the insights provided by this comparative institutional approach. In

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