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Coase and International Business: The Origin and Development of Internalisation Theory

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  • Lowell R. Jacobsen
  • Mark Casson

Abstract

The internalisation theory of the multinational enterprise (MNE) is a significant intellectual legacy of Ronald Coase. US direct investment in Europe became highly political in the 1960s, and neoclassical trade theory had no explanation. A theory of the multiplant enterprise was required, and internalisation theory filled this gap. Using Coasian economics to explain the ownership of production plants and the geography of trade to explain their location, internalisation theory offered a comprehensive account of MNEs and their role in the international economy. This paper outlines the development of the theory, explains the Coasian contribution, and examines in detail the early work of Hymer, McManus and Buckley and Casson. It then reviews the current state of internalisation theory and suggests some future developments. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Lowell R. Jacobsen & Mark Casson, 2015. "Coase and International Business: The Origin and Development of Internalisation Theory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(1), pages 55-66, January.
    • Handle: RePEc:wly:mgtdec:v:36:y:2015:i:1:p:55-66
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    Cited by:

    1. Verbeke, Alain & Kano, Liena, 2016. "An internalization theory perspective on the global and regional strategies of multinational enterprises," Journal of World Business, Elsevier, vol. 51(1), pages 83-92.
    2. Narula, Rajneesh & Verbeke, Alain, 2015. "Making internalization theory good for practice: The essence of Alan Rugman's contributions to international business," Journal of World Business, Elsevier, vol. 50(4), pages 612-622.

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