When entrepreneurs and managers cross borders they encounter a range of costs and challenges arising from political, geographical, economic, and cultural distance between their home environment and the countries they invest in. There are a number of approaches to explaining why firms should nevertheless seek to engage in multinational investment despite the 'liability of foreignness'. They may hold an ownership advantage over a local firm. Locational factors in the host economy might either attract foreign firms or prevent them from servicing the market by exports. It might be more efficient to organize international transactions within a firm rather than use markets for certain transactions because of the costs of opportunism, bounded rationality, and asset-specificity. Multinational investment might be the most efficient means of transferring the tacit knowledge that is embedded in the routines of individual firms.
The history of multinationals can confront these insights with evidence of 'what really happened' over the past centuries. What does history show about the principal drivers of the spread of the boundaries of the firm across national borders? How were entrepreneurs able to build hierarchies that were superior to markets as channels of knowledge transfer? What is the evidence that they were really able to do this? How large was the 'liability of foreignness', and has it diminished over time? What exactly have been the consequences of firms transferring knowledge and other resources across borders? What kind of knowledge have they transferred? How, if at all, have all these things changed over time? What is new today, and what has a long history?
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Publication information: Book title: Multinationals and Global Capitalism: From the Nineteenth to the Twenty-First Century. Contributors: Geoffrey Jones - Author. Publisher: Oxford University Press. Place of publication: Oxford. Publication year: 2005. Page number: 15.
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