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Internalization theory: An unfinished agenda

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  • Casson, Mark
  • Porter, Lynda
  • Wadeson, Nigel

Abstract

Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting. This paper extends it to the industry level. It synthesises internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model which highlights the inter-dependencies between rival firms. Each firm responds to its rivals by jointly optimising production and innovation through inter-dependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm.

Suggested Citation

  • Casson, Mark & Porter, Lynda & Wadeson, Nigel, 2016. "Internalization theory: An unfinished agenda," International Business Review, Elsevier, vol. 25(6), pages 1223-1234.
    • Handle: RePEc:eee:iburev:v:25:y:2016:i:6:p:1223-1234
    DOI: 10.1016/j.ibusrev.2016.03.007
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    Cited by:

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    2. Teresa da Silva Lopes & Mark Casson & Geoffrey Jones, 2019. "Organizational innovation in the multinational enterprise: Internalization theory and business history," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1338-1358, October.
    3. 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.
    4. Fiona Kun Yao & Ming-Jer Chen & Jiatao Li & Danielle Combs & Qiang Li, 2024. "A review of 50 years of research since Knickerbocker (1973): competitive dynamics in international business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(5), pages 522-550, July.
    5. Buckley, Peter & Kandemir, Destan & Liu, Steven Y.H. & Gençtürk, Esra F., 2024. "An internalization perspective on subsidiaries’ reputation and its impact on subsidiaries’ marketing advantage: The moderating roles of resources and autonomy," Journal of Business Research, Elsevier, vol. 175(C).
    6. Casson, Mark & Wadeson, Nigel, 2018. "Emerging market multinationals and internalisation theory," International Business Review, Elsevier, vol. 27(6), pages 1150-1160.

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