Many studies and research have been undertaken on the benefits and disadvantages of internationalisation. Although evident why companies do this, many theories have been developed to explain this phenomenon.
The product cycle framework as developed by Vernon(1966, 1996) devises the product life cycle to the evolutionary existence of multinationals. As product evolves, the location of production process will also move. Coase (1937) and later Williamson (1975) argue that it was more profitable for companies to go international themselves than by any other means. Much criticism has fallen in modern literature on the objectivity of these theories. In the awake of this two alternative schools of thought have emerged. (Almor et al. 2006)
The behavioural school which focuses on the firm and sees internationalisation as an evolutionary process, during which the firm increases its international involvement as a function of heightened knowledge and commitment. (Welch & Luostarinen 1988) And the Economic school which views internationalisation as engagement in cross border activities motivated by rational economic considerations. This school uses Dunning’s (Dunning & McQueen 1982) eclectic theory to specify the conditions, which must be satisfied for firms to engage in cross border production. (Almor et al. 2006) The main driver for the cross border production however has been established as the prospects of a larger market available to the business and the possibility of decreasing operational costs of the business by expanding into operations across the borders.
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