GSM Lecture 2

Management > Global Strategic Management > Comparative advantage > Hymer > Vernon > Product cycle > Buckley and Casson > Internalisation > Eclectic paradigm > Ownership advantages > Motives for FDI > OA, LA and I

OA and LA interactions

OAs interact with LAs in a variety of ways:

• Asset-seeking vs asset acquiring
• The need for supply-side vs demand-driven
• Technology spill overs
• Reverse technology transfer
• The need for absorptive capability of firms and countries
• The need for complementary resources
• The role of governments
• Welfare perspectives of FDI - getting the "right" kind of FDI

Internalisation issues

Globalisation has the problem of the increasing interdependence between economic units, but for which internalisation can cause:

• Changing economic distance
• Enforceability of contracts
• Decline of transaction costs
• The growth of the multi-competence firm
• Increasing firm-specificity of knowledge

Firms can also deal with globalisation using external strategies, such as outsourcing, alliances and M&A.

These internal and external strategies are useful, but can create complexity within the organisation, for which is required Ot advantages to deal with the increasing number of transactions. A lack of Oa can be offset by Ot. For example, a firm may only have one good asset, but if they can transfer that well across the company they will do better than a firm which has lots of assets but no way of transferring them.

Intangible assets are more important to an MNE, but this creates a "fuzzy boundary problem".

Problems?