The First Multinationals: Assyria Circa 2000 B.C

Article excerpt

Introduction

In his recent massive work on MNEs Dunning states that, "... earlier examples of embryonic MNEs can, most surely, be found in the colonizing activities of the Phoenicians and the Romans, and before that, in the more ancient civilisations ... However, this sort of history ... remains to be written" (1993, p. 96). Considerable literature has recorded the evolution of MNEs in Europe since the early Middle Ages (Rostow 1978, North 1981, Chandler 1990, Powelson 1994). There have also been a number of books and articles written on the economic history of the ancient world (e.g. Orlin 1970, Larsen 1976, Aubet 1987). However, little has been written concerning the earliest recorded MNEs.

In an effort to shed light on embryonic MNEs in ancient civilisations this article brings together a modern theory of the MNE and literature on ancient Assyria. This article uses the eclectic paradigm as a model to analyze ancient international trade and attempts to show that the major characteristics of MNEs were a part of the Assyrian business organizations of the time.

Characteristics of an MNE - The Eclectic Paradigm

The definition of MNE used in this article is that accepted by the Organization for Economic Cooperation and Development (OECD) and the United Nations Center for Transnational Corporations (UNCTC), "an enterprize that engages in foreign direct investment (FDI) and owns or controls value-adding activities in more than one country" (Dunning 1993, p. 3).

Though there exist competing theories with different perspectives(1) seeking to explain international production, this article adopts the eclectic paradigm in examining potential MNE behavior in ancient Assyria. The eclectic theory or paradigm offers a framework for determining the extent and pattern of foreign owned activities, it may be handily summarized by the acronym OLI, or ownership, location and internalization advantages (Dunning 1993). It is the configuration of these advantages, ownership, location and internalization, which either encourage or discourage a firm to undertake foreign activities and become an MNE.

Ownership advantages are firm-specific-advantages (FSAs) which are owned or controlled by a firm. Country-specific advantages are ones which are based on the location of the enterprise (Buckley/Casson 1976, Ietto-Gillies 1992). Finally, internalization advantages are those which accrue to a firm when it internalizes or brings inside the hierarchy of the firm activities which could be performed by the market. The following paragraphs provide greater detail on the eclectic paradigm. Readers familiar with the paradigm may wish to skip this section. It is provided since this article may be of interest to at least two groups: international business researchers and historians, the latter group not generally being as familiar with the eclectic paradigm.

Internalization advantages are based on the hypothesis that MNEs grow "by replacing imperfect (or non existent) external markets by internal ones" Buckley (1993, p.198). Several important ideas are contained in this definition. The first is that MNEs can be the most efficient means of international production when imperfect markets exist. The most important imperfect market for MNEs is the pricing of proprietary information which is generated by a firm but has many of the attributes of a public good.

Proprietary information can include knowledge developed by the firm by R&D (both technical and marketing), managerial experience, new production techniques, production differentiation and market knowledge (Ietto-Gillies 1992, Dunning 1993). A public good is "a good for which consumption by one party does not reduce the consumption of others. Knowledge is a public good in this theoretical sense because it can be applied by any person or organization to a specific problem without destroying the ability to apply the knowledge to another use" (Rugman 1980, p. …