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Coase and International Business: The Origin and Development of Internalisation Theory
Author(s) -
Casson Mark
Publication year - 2015
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2706
Subject(s) - coase theorem , multinational corporation , economics , neoclassical economics , investment (military) , work (physics) , politics , foreign direct investment , microeconomics , transaction cost , law , macroeconomics , political science , finance , mechanical engineering , engineering
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.