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Our quest for prosperity has produced great output (i.e. performance) but not always great outcomes (i.e. progress). Despite mounting regulation when it comes to fairness, well-being, and the scope of our humanity, the modern economic system still leaves much to be desired. If practice is to evolve substantively and systematically, then we must help evolve an economic paradigm where mutuality is more systematically complemented by morality. The bases of this morality must rest, beyond the sympathetic sentiments envisaged by Adam Smith, on an expanded and intentional moral reasoning. Moral philosophy has a natural role in informing and influencing such a turn in our thinking, especially when education is the preferred vehicle of transformation. Indeed, rather than just regulate market power we must also better educate market power.

The existing multinational enterprise (MNE) literature has focused on capabilities and value creation challenges, including related to cultural and other distance. To better understand heterogeneity in the foreign country performance of MNEs, however, we need to go beyond the global strategy challenges of capabilities and coordination. Specifically, we need to explore MNEs' value capture challenges abroad and attend to control as a chronic dilemma that is inadequately addressed by internalization. In operating in foreign host countries, MNEs are chronically exposed to two types of largely uninsurable discretion: sovereign discretion of host governments and delegated discretion of host country employees, partners, suppliers, and such. The problem in the first case relates to power; and in the second it relates to information. Power and information are the sine qua non of effective control. Control is a prerequisite for anticipated value capture, which influences the extent of MNEs' capability transfer, input localization, and output adaptation in a given host country. Transfer, localization, and adpatation are the essence of host country value creation, which influences competitiveness and performance there. Accordingly, beyond differences in MNE capabilities, heterogeneity in access to credible power and reliable information in a focal host country predicts heterogeneity in MNEs' competitiveness and relative performance there. This is why and how heterogeneity in macro-level home–host ties (HHTs) explains durable performance differences among foreign MNEs operating in a focal host country. In terms of global strategy research and practice, this turns the spotlight on macro-level HHTs, nonmarket strategy, and, eventually, focused internationalization. It also argues for more microfoundations research on the limits and actual control benefits of internalization.

Reflecting amplified hazards in cross-border exchange and imperfections in markets for intangibles, internalization has been central in multinational enterprise (MNE) theory. This centrality notwithstanding, the fact is that internalization coheres with lower-powered incentives and carries an implicit drawback, namely, higher realized production costs. With the emergence and deployment of information and communication technology (ICT), modern MNEs are reshaping their transnational governance to address this cost. The modern MNE uses ICT to mitigate transaction costs, and evolves more to arm's length exchange to incentivize lower production costs. A testable prediction is that MNEs in industries more susceptible to and employing more ICT will exhibit a reduced propensity for transnational integration. We examine this hypothesis using available data from 1982 to 1997 for US MNEs across all manufacturing sectors. Regression results and robustness tests are strongly congruent with the prediction. This study, a first to explore empirically the role of ICT in the evolution of transnational exchange, suggests that MNE theory, until now founded primarily on transaction cost economics and a cross-border control theory of value capture, is more likely to keep pace with developments in MNE practice by opening up to incentive theories of exchange governance and a cross-border coordination theory of value creation.

The prevailing aspiration of business is performance, while that of society is progress. Capitalism, both the paradigm and practice, sits at the intersection of these dual aspirations, and the essays in this volume explore its fraught status there. Contributions to this volume address questions such as (i) what's the problem with capitalism?; (ii) is the problem just with the practice or with the very paradigm?; (iii) what is progress and who is responsible for it?; (iv) what evolution is required at the individual, system, and paradigm level so that enterprises and the executives who lead them may better integrate performance with progress?; and (v) whither consumers, employees, and investors in this evolution? The book offers perspectives from two distinct intellectual domains-social science and philosophy. Scholars in social science (including economics, management, and sociology) tend to study performance. Ideas of progress, on the other hand, tend to fall more under the purview of philosophers (in particular social and political philosophers). Further, to obtain an insider's view on practice and possibilities, the volume includes essays from a handful of thoughtful business leaders. Research should consider not just how to make sustainability profitable, but also how to make profitability and the modern economic system sustainable. If we are to better comprehend why the world is in protest, to reflect on progress or dilemmas of trust, we must appreciate the tenuous assumptions of modern microeconomics and markets, and hear from modern philosophers about the basis and limits of rationality. Contributors to this volume - Elizabeth Anderson, Professor of Philosophy and Women's Studies, University of Michigan, Ann Arbor Kwame Anthony Appiah, Professor of Philosophy and Law, New York University Kenneth J. Arrow, Emeritus Professor of Economics, and Management Science and Engineering, Stanford University David H. Autor, Professor of Economics, Massachusetts Institute of Technology Jay B. Barney, Professor of Strategic Management, University of Utah Julie Battilana, Associate Professor of Business Administration, Harvard Business School Bertrand Collomb, Honorary Chairman, and former CEO, Lafarge Gerald F. Davis, Professor of Management and of Sociology, University of Michigan, Ann Arbor Robert H. Frank, Professor of Management and Professor of Economics, Cornell University Michael Fuerstein, Assistant Professor of Philosophy, Saint Olaf College Harrison Hong, Professor of Economics and Finance, Princeton University Majid H. Jafar, CEO, Crescent Petroleum Philip Kitcher, Professor of Philosophy, Columbia University Inessa Liskovich, doctoral candidate in economics, Princeton University Jack Ma, Founder and Executive Chairman, Alibaba Group, China James G. March, Emeritus Professor of Organizational Behavior, Stanford University Ramon Mendiola, CEO, Florida Ice & Farm Company, Costa Rica John W. Meyer, Emeritus Professor of Sociology, Stanford University Susan Neiman, Director, Einstein Forum, Berlin Samuel J. Palmisano, Chairman, The Center for Global Enterprise; and Former Chairman, President and CEO, IBM Philip Pettit, University Professor, and Professor of Politics and Human Values, Princeton University; and Professor of Philosophy, Australian National University Subramanian Rangan - Professor of Strategy and Management, INSEAD Mathias Risse,Professor of Philosophy and Public Policy, Harvard University David Schmidtz, Professor of Philosophy, and Professor of Economics, University of Arizona Amartya Sen, University Professor, and Professor of Economics and Philosophy, Harvard University Jim Hagemann Snabe, Member of the Supervisory Board, and former Co-CEO, SAP AG Valerie Tiberius, Professor of Philosophy, University of Minnesota James P. Walsh, Professor of Business Administration, University of Michigan, Ann Arbor

Drawing on transaction cost economics and externalities theory, we argue that private-public partnerships will be necessary when economic opportunity realization (1) calls for industry-specific competencies but entails significant positive externalities (i.e., implies specialized private actions with significant public benefits), (2) is shrouded by high uncertainty for the private actors, and (3) necessitates for private actors high governance costs for contracting, coordinating, and enforcing. Thus, specialized resources, positive externalities, uncertainty, and governance costs are all jointly implicated in our theory.

Multinational enterprises (MNEs) from different home regions now routinely confront one another in third markets. There is, however, little conceptual or theoretical literature on the determinants of outcome patterns in these contests. This paper offers a first attempt at systematic and parsimonious conceptualization of the issue. In Brazil, for instance, while U.S.-based MNEs such as Coca-Cola and IBM lead in their sectors, other leading U.S. MNEs including Citibank, GE, and Pfizer are outsold by European rivals that appear less competitive globally. Extending theory on the liability of foreignness and firm-specific advantages, we contend that (i) the MNE whose home nation has greater ties to the focal host nation (along geographic, colonial, immigration, linguistic, and institutional dimensions) will lead in that host nation; and (ii) ties notwithstanding, if an MNE's firm-specific advantages are so superior that it outsells a rival MNE in that rival's home market, then it will outsell that rival as well in the focal host market. Based on this we develop a conceptual framework, statistical analysis pertaining to MNE competition in Brazil, and three avenues for fruitful new research. Copyright © 2003 John Wiley & Sons, Ltd.

In this article commemorating Raymond Vernon, I make no attempt to summarize his expansive work on the nature and prospects of multinational enterprises (MNEs). Rather, I discuss three forces — rivalry, uncertainty, and time — that Vernon accentuated in his explanations of the behavior of MNEs. I then make brief observations about Vernon and methodology. Subsequently, I speculate on the following question: A hundred years from now, what single idea will Vernon be remembered for? Acknowledging the product cycle as a leading contender, I nominate and discuss (under the moniker “the unending embrace”) another candidate, one that dwells on the undulating tension between MNEs and governments. I conclude by flagging for future research some questions that that central idea raises.

Do multinational enterprises operate flexibly, i.e., do they shift production in response to currency changes? Three theoretical perspectives are developed. Flexibility optimism, premised on information and sunk cost advantages, takes a macro efficiency perspective and predicts sizable responses. Flexibility pessimism, premised on inertia and internal opportunism, takes an organizational perspective and predicts sticky responses. Flexibility realism, premised on the view that to be flexible in the current period multinational enterprises need to have planned and invested accordingly in previous periods, predicts positive, but relatively modest, responses. Empirical analysis spanning the period 1977-1993 finds that multinational enterprises systematically exploit currency shifts, but even in the face of large exchange rate changes, their operational responses are relatively modest. The results appear most consistent with flexibility realism, and this hypothesis is selected over the alternatives considered.© 1998 JIBS. Journal of International Business Studies (1998) 29, 217–237

Multinational enterprises (MNEs) from Europe, the USA and Japan now operate and compete against one another in a number of third-host markets. While we know a great deal about the foreign direct investment (FDI) patterns of these MNEs, we know much less about the actual relative performance of these enterprises in the foreign markets in which they compete. The fact that region-by-region performance data are not readily available must partly explain this. Also there possibly is an implicit belief that MNE foreign performance outcomes might not represent an interesting pattern. In other words, the putative dependent variable (host market relative performance) might not be well behaved or meaningfully researchable (say, because a whole host of factors might be expected to influence it, not to mention the possibility of unsystematic differences across sectors). Partly, too, there might be a sense that competition is competition and ultimately, at least in free market settings, the more productive MNE should prevail no matter where.

This paper compares the responses of intra- and extra-firm trade to exchange rate changes. It does so both to inform the debate on whether these responses are qualitatively different and to improve understanding of the microfoundations of features of trade behavior such as long adjustment lags, the large impact of distance, and the presence of significant home bias. We argue that the informational problems posed by search (acts identifying potential exchange partners) and deliberation (acts assessing their reliability and trustworthiness) play a key role in explaining these features and suggest that multinationals should have advantages in overcoming these problems. Indeed we find that the responses of multinationals to exchange rate changes are both larger and more rapid.

This paper compares the responses of intra- and extra-firm trade to exchange rate changes. It does so both to inform the debate on whether these responses are qualitatively different and to improve understanding of the microfoundations of features of trade behavior such as long adjustment lags, the large impact of distance, and the presence of significant home bias. We argue that the informational problems posed by search (acts identifying potential exchange partners) and deliberation (acts assessing their reliability and trustworthiness) play a key role in explaining these features and suggest that multinationals should have advantages in overcoming these problems. Indeed we find that the responses of multinationals to exchange rate changes are both larger and more rapid.

The purpose of this panel symposium is to show why and how context matters, and to draw attention to the benefits of integrating causal mechanisms and context to explain complex organizational phenomena. Our goal is to initiate a new dialogue among various constituents of the Academy of Management by bringing forward new questions and perspectives that highlight the salience of “contexts”. We believe this panel will generate fresh new debates particularly among Business Policy and Strategy (BPS), International Management (IM), and Organization and Management Theory (OMT) division members; and also will be of interest to members of the Entrepreneurship, Organization Behavior and Research Methods Divisions.

Half a century after Hymer’s (1960) seminal work, bias and discrimination experienced by transnational enterprises in foreign host countries remains widely observed yet unsatisfactorily theorized. Existing work on the liability of foreignness has drawn on economics and sociology and emphasized exogenous factors such as distance and difference (Zaheer, 1995; Zaheer and Kostova, 1999; Eden and Miller, 2004). Yet, bias and discrimination are endogenous responses enacted by national groups securing their interests. A socio-political perspective would hence appear to offer more promise. On the starting premise that foreignness is a socio-political out-group category, we propose that bias and discrimination (B&D) are targeted behaviors enacted by in-group agents when they perceive threats to national or domestic interests. Whereas the costs of doing business abroad are a function of home-host distance and difference, B&D are a function of home-host misalignment of interests. Our theory sheds light on the endoge...

It has been argued persuasively that social networks hold relevance for economic action. Yet, in light of the taken-for-granted role of prices, it is crucial to specify when and how social networks influence the efficiency of economic actions taken by actors oriented primarily, as business firms tend to be, toward economic objectives. In this article I contend that when actors need to but cannot, independently or via market mechanisms, cost-effectively ascertain the identity and reliability of potential exchange partners, then scope exists for social networks to appreciably and systematically influence efficiency.

IN THE MID-1980s, when the dollar declined from its record highs, observers impatiently waited for the U.S. trade balance to respond. In the short run, instead of improving, the deficit continued to erode. Among economists, this sparked considerable research of both an empirical and theoretical nature. The empirical research appeared to uncover important differences in the behavior of U.S. and foreign firms that helped explain the sluggish response of the U.S. trade balance. U.S. exporters, it appeared, fixed their export prices in dollar terms and fully passed the exchange rate effects through into their foreign currency prices; indeed, as figure 1 shows, between 1985 and 1989 the U.S. export price index compiled by the Bureau of Labor Statistics (BLS) moved precisely in line with the domestic wholesale price index. ' As Paul R. Krugman and Richard E. Baldwin observe, this implied that measured in dollars, any

In the MNE literature it is well established that if technology refers to R&D (i.e., knowledge intensity) then technology causes internationalization to be tightly coupled with internalization. But...