James R. Markusen
International trade theory and the study of international business have never had much to say to each other. It doesn't help that practitioners of these two disciplines generally reside in economics departments and business schools respectively. But that aside, there are fundamental differences in the types of questions, objectives, and tools of analysis in the two fields. The tradition of trade theory is primarily one of general-equilibrium analysis, and by its very nature this requires researches to adopt very simple models of firms. Indeed, in competitive models with constant returns to scale, the firm has no real meaning and researches speak of 'industries', not firms. This focus is consistent with the objectives of trade theory, which are to explain the overall pattern of production, consumption, and trade in the world economy.