Competitive Advantage and the Existence of the Multinational Corporation: Earlier Research and the Role of Frictions

• Date: 01 February 2014
• DOI: http://doi.org/10.1111/j.2042-5805.2013.01068.x
• Author: Christian Geisler Asmussen,Nicolai J. Foss
• Published date: 01 February 2014

COMMENTARY

COMPETITIVE ADVANTAGE AND THE EXISTENCE

OF THE MULTINATIONAL CORPORATION: EARLIER

RESEARCH AND THE ROLE OF FRICTIONS

CHRISTIAN GEISLER ASMUSSEN1* and NICOLAI J. FOSS1,2

1Department of Strategic Management and Globalization, Copenhagen

Business School, Frederiksberg, Denmark

2Department of Strategy and Management, Norwegian School of Economics

and Business Administration, Bergen, Norway

This article provides a counterpoint to Hashai and Buckley’s article ‘Is competitive advantage

a necessary condition for the emergence of the multinational enterprise?’We agree with their

conclusion that it is, in fact, not a necessary condition, but argue that the theoretical reasons

behind this are different and more diverse than the ones they propose. We suggest that much

extant economic theory is, in fact, consistent with their view that firms may internationalize

without owning or achieving competitive advantages, and we model various other ways in

which imperfections can drive their overall result. We strongly applaud Hashai and Buckley’s

attempt to add more rigor to international business theory and call for future work to extend

this debate. Copyright © 2014 Strategic Management Society.

INTRODUCTION

We are grateful for this opportunity to comment on

Niron Hashai and Peter Buckley’s (HB) article

(Hashai and Buckley, 2014, this issue), Is com-

petitive advantage a necessary condition for the

emergence of the multinational enterprise?, which

partly summarizes and partly extends their earlier

article (Buckley and Hashai, 2009). Overall, we are

fully sympathetic toward attempts to add more

rigorous reasoning to our field, both in terms of

making assumptions and deductive chains fully

explicit and in terms of adopting a formal (math-

ematical) approach. We are particularly sympathetic

of such exercises when they show that deeply

ingrained ideas are special cases or not correct at all.

We, therefore, certainly applaud the aim of HB.

Nevertheless, management research inherently

deals with highly complex phenomena (Hayek,

1967) and management researchers are typically less

patient with the often heroic assumptions that char-

acterize much of economics (Foss and Hallberg,

forthcoming). In this commentary, we bring this

discord to the forefront of the debate about the emer-

gence of multinational corporations (MNCs) and, at

the same time, present some challenges to the spe-

cific form of the modeling effort of HB, including

some of the assumptions they make as part of this

effort. We describe these in some detail and discuss

some ways in which their model can be taken a bit

further. We begin by discussing the motivating

assumptions or claims in the HB article.

Keywords: multinational corporations; competitive advantage;

transaction costs; mergers and acquisitions; trade theory;

frictions

*Correspondence to: Christian Geisler Asmussen, Department

of Strategic Management and Globalization, Copenhagen

Business School, Kilevej 14, 2nd Floor, 2000 Frederiksberg,

Denmark. E-mail: cga.smg@cbs.dk

Global Strategy Journal

Global Strat. J., 4: 49–54 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1111/j.2042-5805.2013.01068.x

Copyright © 2014 Strategic Management Society