International business: theories and issues

Convenor: Dr Paz Estrella Tolentino
Assessment: A two-hour examination (75%) and coursework (25%). The coursework deadline is December 9th 2011 (Absolute Cut-Off deadline – 30th December 2011)

Aim

The aim of this module is to develop an advanced understanding of the theoretical approaches and current issues regarding international trade, international production and the multinational enterprise (MNE).

Learning objectives

By the end of this module, students will be able:

• to appreciate the existence and relevance of economic theory dealing with international trade;
• to understand the emergence of a distinct body of economic and international business theory dealing with international production and the MNE;
• to describe fully the various theoretical strands explaining international trade,  international production and the MNE at different levels of economic analysis;
• to compare and critically analyse competing and complementary theoretical approaches to explaining international trade, international production and the MNE; and
• to examine the relevance of an understanding of theory to explaining the evolving issues in international trade, international production and the MNE.

Content

The module focuses on describing and analysing the various economic and international business theories and issues relating to international trade, international production and the MNE at the microeconomic, mesoeconomic and macroeconomic levels.

• The theories and issues of international trade
• Trade and comparative advantage: Smith and Ricardo, Heckscher-Ohlin model of trade
• Trade and competitive advantage: economies of scale, imperfect competition, intra-industry trade, and dynamic technological differences (product cycle model and technology gap model). Porter’s competitive advantage.
• International factor movements: labour mobility and capital mobility
• The theories and issues of international production and the MNE
• The microeconomic theories: market power or Hymer theory, internalization theories; and evolutionary theory
• The macroeconomic theories: product cycle model I, the contribution of the Japanese economists, the investment development cycle/path; the stages-of-development approach; the theory of the emergence and evolution of MNEs based on distinctive patterns of national economic development; the role of financial factors in FDI.
• Theories based on competitive international industries: later versions of the product cycle model; theories of oligopolistic interaction between MNEs; the technological accumulation and competence approach; the internationalisation of capital approach.
• Eclectic paradigm

Background reading

The following textbooks would enable students to gain an idea of the subject matter.

• Ietto-Gillies, G (2005), Transnational Corporations and International Production: Concepts, Theories and Effects, Edward Elgar.
• Krugman P R and Obstfeld M (2009), International Economics: Theory and Policy, 8th ed., Addison-Wesley.
• Pitelis C N and Sugden R  (eds) (2000), The Nature of the Transnational Firm, 2nd ed., Routledge.
• Salvatore D (2007), International Economics, 9th ed., John Wiley.