Internalization theory: An unfinished agenda

Mark Casson, Lynda Porter and Nigel Wadeson

International Business Review, 2016, vol. 25, issue 6, 1223-1234

Abstract: Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting. This paper extends it to the industry level. It synthesises internalization theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model which highlights the inter-dependencies between rival firms. Each firm responds to its rivals by jointly optimising production and innovation through inter-dependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalization strategy of each firm.

Keywords: Internalization; Industry; Competition; Price; Innovation; Ownership (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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DOI: 10.1016/j.ibusrev.2016.03.007

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