Reasons For Internationalization

992 Words 4 Pages
Why do businesses Internationalize
With the increasing globalization of economy, internationalization becomes an important part of commercial activities in the company. The multinational corporations exert significant influence on the connection of global economy. Whether a company is big or small, the tendency towards an international outlook is apparent. The essay will discuss the motives and reasons of internationalization and draw on literature from mainstream and alternative theories. The essay will first discuss the efficiency-seeking theories, including neoclassical trade theories and mainstream theories. It will be followed by the interpretation of strategic theories. The last section will particularly concentrate on the role of nation-state
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In fact, it can be divided into two categories, those which are concerned with strategy and those which are critical of the transnationalization of production. First, global strategic rivalry theory was developed to examine the impact of trade flows arising from global competition between multi-national corporations. For example, Durand and Wrigley (2009) reports that Walmart and Carrefour compete to penetrate into new markets to expand market share. Firms strive to gain the sustainable competitive advantage which it can exploit to dominate the global market place and defend its market position. It includes owning intellectual property, investing in research and development, achieving economies of scale and exploiting the experience curve. Moreover, from the point view of Hymer, owing to the market imperfections, there are two determinants on internationalization of production to strengthen a company’s market power in the global economy. First, specific advantages, especially when domestic investment opportunities are exhausted, the firm is in a favorable position to branch out in foreign production locations with its administrative capacity and financial power. Second, overcoming conflicts in foreign market through collision or merger and acquisition presents gains in market power. It is important factor to push companies to

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