Internationalization
[1] Internationalization is a crucial strategy not only for companies that seek horizontal integration globally but also for countries that addresses the sustainability of its development in different manufacturing as well as service sectors especially in higher education which is a very important context that needs internationalization to bridge the gap between different cultures and countries.
Those entrepreneurs who are interested in the field of internationalization of business need to possess the ability to think globally and have an understanding of international cultures.
By appreciating and understanding different beliefs, values, behaviors and business strategies of a variety of companies within other countries, entrepreneurs will be able to internationalize successfully.
Entrepreneurs must also have an ongoing concern for innovation, maintaining a high level of quality, be committed to corporate social responsibility, and continue to strive to provide the best business strategies and either goods or services possible while adapting to different countries and cultures.
It builds on David Ricardo's theory of comparative advantage by predicting patterns of commerce and production based on the factor endowments of a trading region.
These are known as: Leontief's paradox in economics is that the country with the world's highest capital-per worker has a lower capital:labour ratio in exports than in imports.
This econometric find was the result of Professor Wassily W. Leontief's attempt to test the Heckscher-Ohlin theory empirically.
Further, international trade will still occur between two countries having identical preferences and factor endowments (relying on specialization to create a comparative advantage in the production of differentiated goods between the two nations).
[9] The idea that multinational corporations (MNEs) owe their existence to market imperfections was first put forward by Stephen Hymer, Charles P. Kindleberger and Caves.
[11] By contrast, the insight of transaction costs theories of the MNEs, simultaneously and independently developed in the 1970s by McManus (1972), Buckley and Casson (1976), Brown (1976) and Hennart (1977, 1982), is that market imperfections are inherent attributes of markets, and MNEs are institutions to bypass these imperfections.
Some economists have asked whether it might be effective for a nation to shelter infant industries until they had grown to a sufficient size large enough to compete internationally.
[20] Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor.
[21] The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a multinational corporation (MNC).
In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate.
[22] The monopolistic advantage theory is an approach in international business which explains why firms can compete in foreign settings against indigenous competitors[23] and is frequently associated with the seminal contribution of Stephen Hymer.
He suggested that firms invest in foreign countries in order to maximize their specific firm advantages in imperfect markets, that is, markets where the flow of information is uneven and allows companies to benefit from a competitive advantage over the local competition.
Stephen Hymer also suggested a second determinant for firms engaging in foreign operations, removal of conflicts.
Through FDI, a multinational can share or take complete control of foreign production, effectively removing conflict.
By choosing different markets and production locations, the risk inherent to foreign operations are spread and reduced.
Stephen Hymer can be considered the father of international business because he effectively studied multinationals from a different perspective than the existing literature, by approaching multinationals as national companies with international operations, regarded as expansions from home operations.
[26] The technology gap theory describes an advantage enjoyed by the country that introduces new goods in a market.
[25] The Uppsala model[27] is a theory that explains how firms gradually intensify their activities in foreign markets.
[29] The key features of both models are the following: firms first gain experience from the domestic market before they move to foreign markets; firms start their foreign operations from culturally and/or geographically close countries and move gradually to culturally and geographically more distant countries; firms start their foreign operations by using traditional exports and gradually move to using more intensive and demanding operation modes (sales subsidiaries etc.)
[37] Coase sets out to define a firm in a manner which is both realistic and compatible with the idea of substitution at the margin, so instruments of conventional economic analysis apply.
