Working Paper Series
The International Firm: A Vehicle for Overcoming Barriers to Trade and a Global Intelligence Organization Diffusing the Notion of a Nation
Abstract: The multinational firm (MNF) is introduced as the
intersection between trade theory and the theory of the firm. I show that
economies of scale associated with various knowledge inputs have made it
possible for firms to grow large through internationalization and, once
large, staying competitive and large. Internationalization is a technique
of both overcoming barriers to trade, and of efficient learning to stay
International firms are increasingly becoming large and
highly mobile carriers of industrial knowledge embodied in teams of humans.
With barriers to trade and factor movements further reduced in Europe the
first reason for globalization will decrease for firms located inside the
internal market, but intensified technological competition will make the
second factor increasingly important, constantly shifting the intelligence
locus of the business organization to the markets where the most advanced
industrial knowledge is being exhibited in competition. Europe will become
such a locus of competition and competence allocation to the extent "it"
lives up to its ambition to deregulate markets, and especially the markets
for ownership and control. In general global markets are seen as a vast
source of business opportunities and the firm as a local source of
competence to exploit the opportunities.
Keywords: Multinational firms; trade barriers; international trade; economies of scale; (follow links to similar papers)
JEL-Codes: F15; F23; L22; L23; (follow links to similar papers)
40 pages, December 1988
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