Multinational Banking and the Theory of Internalization

Alan Rugman

Chapter 5 in Inside the Multinationals 25th Anniversary Edition, 2006, pp 71-86 from Palgrave Macmillan

Abstract: Abstract This chapter applies the theory of internalization to explain the activities of international banks. It has already been established that multinational banks have stable earnings, see Rugman (1979) Chapter 12 and Khoury (1980). What are the reasons for such a good performance? Are they to be found in the international environment, external to the multinational bank, or are they internal? Here it is argued that the latter explanation of earnings stability is of great importance. Indeed, the theory of internalization, used successfully in analysis of the multinational enterprise elsewhere in this book, can also be applied to the activities of multinational banks. It is shown here that multinational banks act as vehicles for the internalization of imperfections in international financial markets and that they provide specialized information services which are not otherwise available to multinational enterprises.

Keywords: Multinational Enterprise; International Diversification; Domestic Bank; International Financial Market; Foreign Operation (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62516-7_5

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DOI: 10.1057/9780230625167_5

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