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INTERNALIZATION THEORY
AND ITS IMPACT ON THE FIELD
OF INTERNATIONAL BUSINESS
Alan M. Rugman and Alain Verbeke
ABSTRACT
Internalization theory explains the existence and functioning of the
multinational enterprise. It contributes to understanding the boundaries
of the multinational enterprise, its interface with the external environment
and its internal organizational design. Much work in the international
strategic-management sphere has unfortunately not taken on board
internalization-theory thinking and lacks the insights provided by this
comparative institutional approach. In this chapter, we show how wellknown international strategic-management models could be enriched and
their normative implications altered by adopting an internalizing-theory
lens.
INTRODUCTION
In this chapter we examine several international strategic-management
models revisited through an internalization-theory lens. Internalization
theory explains the existence and functioning of the multinational enterprise
International Business Scholarship: AIB Fellows on the First 50 Years and Beyond
Research in Global Strategic Management, Volume 14, 155–174
Copyright r 2008 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 1064-4857/doi:10.1016/S1064-4857(08)00003-X
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ALAN M. RUGMAN AND ALAIN VERBEKE
(MNE) (Rugman, 1981) and it contributes to understanding the boundaries
of the MNE, its interface with the external environment and its internal
organizational design.
Conventional internalization theory has focused primarily on explaining
which parameters would stimulate firms to expand across borders, and on
entry-mode choice. More recent internalization-theory extensions have
focused on establishing linkages with strategic-management perspectives on
the MNE and on describing differentiated-network MNEs. The great
strength of internalization theory is its comparative institutional approach
to assessing the...