Buckley 2002 Article

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s t h nternational usiness ResearchA g e n d a Runn ing u t o S t e a m

PeterJ. BuckleyCENTRE FOR INTERNATIONAL BUSINESS, UNIVERSITY OF LEEDS, UKThis research note challenges inter-national business researchers tothink of their future work in termsof the past achievements of theirdiscipline. It identifies three key re-search areas corresponding to at-

INTRODUCTIONThis research note suggests that theinternational business research agenda is

running out of steam after a period ofvibrancy. It suggests that 'the big re-search question' with which interna-tional business researchers are engagedis no longer clear cut and that, after threedistinct periods where a definite re-search agenda was pursued, no distinc-tive topic has emerged to take the placeof the issues previously, and largely suc-cessfully, tackled.

PREVIOUS RESEARCH AGENDAThree major topics have been success-

fully tackled by researchers in the inter-national business field. These are shownin Table 1. The three key topics were:

1. explaining the flows of foreign di-rect investment (FDI);2. explaining the existence, strategyand organization of multinational en-terprises (MNEs);

tempts to tackle crucial empiricalquestions: the explanation of for-eign direct investment, the multina-tional firm and the globalization ofbusiness. It ends by considering thefuture research agenda.3. understanding and predicting thedevelopment of the internationaliza-tion of firms and the new develop-ments of globalization.Each of these research epochs is exam-

ined below.Explaining Flows of ForeignDirect Investment

Following World War II and the re-establishment of the international econ-omy, the renewal and increase of inter-national flows of direct investment werea key feature of the dynamism of West-ern economies. The key empirical prob-lematic was the explanation of privateflows of investment, controlled by indi-vidual corporations. Of particular impor-tance were flows of capital from the USAto Western Europe.Traditional explanations of this surgewere inadequate. International trade the-ory assumed immobile factors of produc-tion (labour and capital) and macro ex-

PeterBuckley is Professorof InternationalBusiness and Directorof the CentreforInternationalBusiness, University of Leeds (CIBUL). He is President of the Academy of InternationalBusiness (2002-04) and was Vice-President 1991-92. He was elected a Fellow of AIB in 1985.JOURNAL OF INTERNATIONALBUSINESS STUDIES, 33, 2 (SECONDQUARTER 002): 365-373 365


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TABLE 1PAST MAJORTOPICSIN INTERNATIONALUSINESSRESEARCH

ResearchAgenda ApproximateDates Topics CountryFocus1. ExplainingFlows of Post WWII-to 1970s US FDI in Europe EulropeFDI ManagerialIssues [US -* Europe]of Investing Latin AmericaAbroad Canada2. Explanationof 1970's-1990 Theories of MNE LDCSExistence, Strategyand Strategiesof MNE JapanOrganizationof MNEs Organizationof (MNEsfromLDCS)MNE 4 Little DragonsForeignMarket

ServicingStrategiesSmallerfirms in IBInternationalEconomicIntegration3. Internationalization o Mid 1980's-2000 JointVentures. EasternEuropeGlobalization Alliances 'Asian Crisis'New forms of (M&A?) ChinaInternationalBusiness CompetitivenessMeaning(s)ofglobalization'Bornglobals'

planations of capital moving in response out-compete local firms. Barriers toto differential rates of interest were not trade and barriers which prevent host-only infeasible, but failed to deal with country firms from duplicating this ad-important industrial differentials within vantage mean that FDI is frequently thethese flows. (The steel industry remained preferred form of exploiting this advan-largely national but automobile manu- tage in foreign markets. The advantagefacturers quickly internationalised). enables the foreign entrant to overcomeThe initial solution lay in moving the the innate advantage of knowledge of thetheory of FDI into the sphere of indus- local market and business conditionstrial economics. Although elements of possessed by indigenous firms. Hymer'sthis approach had been foreshadowed supervisor, Kindleberger (1969), in a(Penrose, 1956; Bye, 1958)1, it was the popularising book, examined key areasdoctoral dissertation of Stephen Hymer where these internationally transferable(1960, published 1976) which achieved advantages were likely to be important,the breakthrough. Hymer's central prop- thus providing a testable empiricalosition was that the international firm agenda for research. Hymer was fortu-making the entry into a foreign market nate to be able to draw on John Dun-must possess an internally transferable ning's (1958) meticulous analysis of US'advantage', the control of which gives FDI in the UK and on Bain's (1956) anal-it a quasi-monopolistic opportunity to ysis on barriers to entry into industries,

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later refined by Caves (1971) in a paperwhich first systematised the industrialeconomics of foreign direct investment.The product cycle hypotheses, chieflyassociatedwith RaymondVernon (1966),was particularlysuccessful in explainingthe dynamics of US FDI in Europe byclose attention to changes in both thesupply and demand sides and their com-plex interaction.However, it proved dif-ficult to stretch this framework to thecases of EuropeanandJapanesemultina-tionals, whose presence was becomingmore salient (Vernon, 1974) and theframework,but not the underlying con-cepts, became outdated (Vernon, 1979).A second stream of research on flows ofFDI concerned investment in less devel-oped countries (Lalland Streeten, 1977).The role of the strategy of the firm atthis stage took a back seat to economicdeterminants of FDI. However, severalstudies took an evolutionary, interna-tionalization view of the firm. Promi-nent among approaches deriving from abehavioural theory of the firm was Aha-roni's (1966) work on the foreign directinvestment decision process. This book,with its focus on uncertainty and infor-mation, links to the work of the Uppsalaschool whose 'stages' model of interna-tionalization become the foundation forthe gradualist step-by-stepinternational-ization model (Carlson, 1974, 1975; Jo-hanson and Wiedersheim-Paul, 1975;Jo-hanson and Valne, 1977). These modelssuggestedan incrementalapproachto in-ternational involvement, 'deepening in-volvement' or 'creeping incrementalism'as the firm is pulled by market (or cost)attractionandpushed by executive inter-est and learning. This is in contrast tolater approaches of planned globaliza-tion. FDI was seen, at this stage, asdriven by external circumstance, some-what unplanned and the coordinating

and planning role of the firm were notcentral to theorizing. That was about tochange.The Multinational EnterpriseThe multinational enterpriseas an en-tity, with problemsof organizationand apurposive strategybecame central to theinternational business agenda in the1970s. This impetus came from two di-rections and it is possible to argue thatthe two research thrustshave never been

fully reconciled.The first approach followed AlfredChandler'sreview of the changes in busi-ness organizationalform through multi-function operation to divisionalization(1962) and the growth and impact ofmanagerial hierarchies (1977). This ledto a group of empirical studies on theorganization of MNEs of different ori-gins2, illuminated also by the painstak-ing historical work of Mira Wilkins(1970, 1974). The problems of organisinga multinational firm were analysed inthe context of the tensions in the firmand the external pressures on it. Oneissue is whether the firm should be di-vided into domestic and internationaldivisions (in the era of globalizationnowa ratherredundant debate) and second,the direction of managerialline respon-sibility-should the primary organiza-tional principle be functional, productorgeographical area? Further, there is thequestion of coordination with the othertwo variables and the issue of how thisevolves over time (Stopford and Wells,1972). The resource based theory of thefirm has since had a major role in theexplanation of MNEs and their strategy.The second approachderives from theideas of Ronald Coase (1937) and to-getherwith concepts related to the trans-action cost economics approach of Wil-liamson (1975) on 'markets and hierar-

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chies', the internalization approach hasbecome the dominant paradigm for theanalysis of the MNE. Although precededby McManus (1972) and closely fol-lowed by Hennart (1982) and Sweden-borg (1976), the standard treatment isthat of Buckley and Casson (1976). Thebasic approach is marginalist: by care-fully specifying the transactional costsand benefits of internalizing the externalmarkets which face particular firms inparticular economic circumstances, pre-dictions can be made between internallyand externally organised markets whichfix the growth of the firm. A firm willgrow by internalizing imperfect externalmarkets until it is bounded by markets inwhich the transactions benefits of furtherinternalization are outweighed by thecosts. The incidence of transactionscosts in internal (agency costs) and ex-ternal markets can thus be used to derivepropositions on the speed and directionof the growth of the firm. Both locationaldeterminants (exports versus foreignproduction) and ownership factors (di-rect investment versus licensing) specifythe foreign market servicing network ofthe firm.

John Dunning undertook a major sys-tematizing effort in the formulation ofhis eclectic (theory, later) paradigm(1977, 1979, 1980, 1988). This has theunintended effect of diverting attentionfrom answering big empirical issuesinto attempting to fill the boxes sug-gested by the theory and to widen thescope of a pre-existing explanatoryframework. The relationships betweenthe three pillars of Dunning's explana-tory framework (ownership, location andinternalization advantages ) led tosome interesting academic exchangesand empirical developments but not to anew research agenda.

Internationalization toGlobalizationThe rise of the global economy has

been an important element in the inter-national business agenda since the1980s. The sporadic, unplanned, exter-nally driven approaches to internationalstrategic planning needed to be super-seded by more formal models of globalstrategy and the myriad ways of doinginternational business, particularly stra-tegic alliances and international jointventures, had to be captured by a holistictheoretical approach. The more overtstance of national governments towardscompeting in a global market led to afocus on competitiveness and the open-ing of new markets in the former social-ist countries led to studies of the 'transi-tion' (integration into global capitalism).The notion of competitiveness becameprominent. Competitiveness often wastaken to mean simply out-competing ri-vals in the global market. Plans toachieve this were formulated at national,industry, firm and sub-unit of the firm(Buckley et al., 1988). A national levelformulation of this interpretation (howto do better than your rivals) was fa-mously formulated by Porter (1990) andhis diamond framework and it at-tracted criticism and modification frominternational business scholars (Dun-ning, 1997; Rugman, 1993).Prominent amongst new theorizingwere concerns for the understanding ofIJVs and alliances (Contractor and Lor-ange, 1988) and for studies of alliancecapitalism (Dunning, 1997). There wasalso renewed concern in the form of or-ganization able to cope with the newdemands (Bartlett and Ghoshal, 1989).Models now had to deal with the ex-treme diversity and reorganization of ac-tivities and with firms which were al-JOURNALOF INTERNATIONALUSINESS STUDIES68


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ready international in scope, rather thanthose seeking internationalization as agoal. The object of firm strategy became

flexibility , in order to adjust to in-creases in volatility as the sources ofchange and threat multiplied (Buckleyand Casson, 1998).These challenges were largely met by areconfiguration of concepts. For in-stance, the model of the transnationalgiven by Bartlett and Ghoshal combinesVernon's three drivers (innovation, com-peting with rivals on cost and differenti-ation of product) but removes their tem-poral sequencing. Similarly, the microanalysis of IJVs covers performance andcontrol but also relies on newer conceptssuch as trust to deal with issues of man-aging beyond the boundaries of the firm.The appearance of instant MNEs 'bornglobals' requires a rapid telescoping oftime but still faces the firm with Aha-roni/Penrose problems of knowledge as-similation and verification to combatextreme uncertainty and with the in-corporation and acculturation of new ex-ecutives. The new dot com companieshave found this balance too challengingto cope with in the short term.

The Role of CultureThis threefold division ignores an im-portant element in international busi-ness theorizing and empirical studies-the role of culture and in particular the

impact of differing national cultures(Hofstede, 1983, 1991). The interplayof national cultures and organizationalcultures, including the organizationalculture of multinational organizationswhich might augment, transcend or con-flict with particular national culturaltraits, represents a research agenda withmuch life left in it. The whole questionof comparative management has beena strand of work parallel to and cross

fertilising mainstream internationalbusiness research and frequently groupedwith other (more managerialist) literatureas international management (Buckley,1996). These issues are perhaps best un-derstood as exemplars of a particularlyfruitful methodological approach-thecomparative method, rather than as an-swering particular issues or confrontingradically separate agendas and stylizedfacts.

WHATNOW?THECURRENTRESEARCHAGENDAThe above, overly brief, review showsthat strength of past epochs of interna-tional business research in its close en-

gagement with empirical reality. Interna-tional business research has been suc-cessful because of its adroit choice ofconcepts with which to confront and ex-plain real changes in the world econ-omy. It is not now clear that there is a bigempirical question which requires ex-planation (Table 2).Several potential topics may be sug-gested as candidates [Table 3]. They in-clude mergers and acquisitions (M&A),knowledge management, geography andlocation. In addition, further explanation(or deconstruction) of the concept ofglobalization, with predictions for its fu-ture (further integration or fragmenta-tion) may be suggested. New institutionsin the wake of globalization, such as theincreasing role of NGOs (non-govern-mental organizations), too, might be can-didates for important research agendas.Unlike the above mixed bag, interna-tional business scholars often do have afixed country focus. The entry of Chinaas a major player in the global economyhas given new impetus to single countrystudies of the market entry and devel-opment behaviour of foreign firms inChina. The correspondingly disappoint-

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TABLECURRERERESEARCHAGENDAIN INTERNATIONAL USINSS

ResearchAgenda ApproximateDates Topics CountryFocusThe Big Question? 2000 onwards. M&A? China[LegacyIssues only?] Knowledge Management? India?Geographyand Location?Globalization?Fragmentation?New Institutions (NGOS)?

ing role of India may, eventually, giverise to a new set of such studies.THEFUTUREOFINTERNATIONAL

BUSINESS RESEARCHThe above analysis has suggested thatinternational business research has suc-

ceeded because it has focussed on, insequence, a number of big questionswhich arise from empirical develop-ments in the world economy. Theagenda is stalled because no such bigquestion has currently been identified.This calls into question the separate ex-istence of the subject area. It raises theold problem of the relationship between

TABLE3RESEARCH SSUES FOR2000 ONWARDS

1. Do we need a 'big question'?2. Relationship with other functionalareas-how distinctive is IB research?3. Is the answer in methodology?(Culture,comparativestudies,distinctive methods).4. Feedbackto other disciplines? (Leaderor Follower?)Evidence?5. Area of application-applied conceptsfromother areas?IB as empirical field-testing groundfor concepts?

international business and other func-tional areas of management and socialscience.3 Without a close interaction be-tween theoretical development and em-pirical reality, international businesscould become a merely an area of appli-cation for applied concepts from otherdisciplines.The way forward is, paradoxically, tolook back. The need is to look back to thesuccesses of international business re-search. These successes were achievedby identifying the key empirical factorsin the global economy which needed tobe explained and then searching out atractable means of explication within acoherent theoretical framework. The firststep is to identify the most importantstylized facts.In its successful era, internationalbusiness researchers not only importedconcepts and paradigms, they also ex-ported them to neighbouring areas. Thisdoes not seem to be occurring at the mo-ment. One response is to argue that in-ternational business is defined by its dis-tinctive methods, its attention to culturaldifferences and the comparative method,for instance. An alternative argumentmight be that no big research question isneeded-there are lots of issues left overfrom the preceding research epochs (leg-acy issues). These seem to be inadequateJOURNALOF INTERNATIONALUSINESS STUDIES70


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responses to a keenly felt problem. Per-haps there is a need for internationalbusiness researchers to discover a new'big question . If so, this back-to-basicsagenda requires the collation of new styl-ized facts.

Among these may be the following is-sues:1. Can we explain the sequence of en-try of nations as major players in theworld economy? (Great Britain, USA,Germany, Japan, Singapore, Korea,China).2. Why are different forms of companyorganization characteristic of individ-ual cultural backgrounds? Or is this anartifact?3. In what empirical measures can weidentify trends to (and away from)globalization?4. Challenges to global capitalism.

NoTEs1. A great deal more could be said ofthe research which predated and fore-shadowed Hymer's analysis, but that isfor another paper.2. Pavan (1972) on Italy, Rumelt (1974)on the USA, Channon (1973) on the UK,

Dyas and Thanheiser (1976) on Franceand Germany and Wrigley (1978) onCanada.3. Many international business schol-ars would suggest that the main problemis the appropriation of IB topics byscholars from other disciplines. The con-cern of this paper is not who does theresearch, but what that research shouldbe.

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Buckley 2002 Article