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Students name id 10 theory grew casson 2018 observes

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Student’s NameID10theory grew, Casson (2018) observes that in the 1990s, a ‘systems view’ was developed whichthe multinational enterprise was modeled as a complex of interdependent linkages betweenmodular activities such as production and marketing. This approach was applied to global supplychains in the 2000s. At the same time, a wide range of contractual alternatives to themultinationals was examined, including franchising and subcontracting. New questions wereraised, such as whether multinationals grew from domestic firms through internalization, orwhether they were born globally. Another question was whether the multinationals were global,or they were regional in scope. This, however, is explained by the theories of multinationalenterpriseTrade theoriesThe standard oligopoly model of international trade led to the rise ofMNEs. Venon(2017) observed that, in the 1960s, the trade economists at the time (and to an extent those oftoday) saw MNEs as a component in the long-term capital section of the balance of payment.Their existence led to the development of large scale exports and foreign direct investment(FDI). FDI occurred due to the flow of capital from one country to another resulting from thedifference in interest rate. Moreover, they occurred where investors controlled foreign assets andportfolio investment where they did not.The view of MNE’s having rooted from the existence of foreign direct investments hastwo major shortcomings. First, there is no direct match between FDI and the existence of MNEs.Second, differences in real interest rates neither provide a necessary nor sufficient reason for theexistence of MNEs (Buckley & Casson, 2016). FDI measures the export of capital from onecountry to the rest of the world. However, this is an imperfect measure of the evolution of MNEsbecause a firm establishing a plant or office in a foreign country can expand without capital
HUMAN RESOURCE MANAGEMENTStudent’s NameID11export from the domicile country by reinvesting its profits or borrowing locally. For example, aUS study on multinational corporations revealed that the sales of these corporation’s foreignaffiliates topped up to $7 trillion in 2013 (Commerce, 2019). It is this kind of revenue that can bereinvested in other countries.The view that the existence of MNEs could be explained by international differences ininterest rates stood and was accepted by economists until Steven Hymner attacked it in his Ph.D.thesis in 1970 as observed by Pitelis and Teece (2010). Hymner asked why, if FDI was motivatedby the search for higher returns, it was undertaken by firms that sought control of foreign assets.The research also noted the presence of simultaneous FDI cross flows with the US bothexporting and importing from the same country where they even competed for resources. Thisshow that the trade theories did not explain fully on how there was a relation between directfinancial investments and the existence of MNE’s. This lead to economists looking into literature

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Term
Spring
Professor
Mugenda
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