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After World War II, due to the rapid growth of multinational corporations (MNCs), the international business (IB) theory related to MNCs began to develop gradually. Core theories in the field of IB analyze the overseas activities of enterprises. The development of related theories can be traced back to Hymer’s doctoral dissertation titled, “The International Operations of National Firms: A Study of Direct Foreign Investment” in 1960, when he was at the Massachusetts Institute of Technology in the United States (US). He proposed the monopolistic advantage theory (MAT) in a dissertation published in 1976. Before the MAT, the international trade theory (ITT)—with the factor endowment theory as its core—was primarily employed to explain the behaviors of enterprises concerning foreign direct investments (FDIs). According to ITT, factor endowments determine the FDI behaviors of enterprises. Therefore, countries with capital shortages exhibit high-interest rates and vice versa, resulting in capital flows from countries with sufficient capital to those that lack it (MacDougall, 1960).
From 1914 to 1956, Hymer (1960) confirmed that US MNCs were generally concentrated in several industries that were insensitive to fluctuations in interest rates. Furthermore, most MNCs raised funds in the capital market of the host countries. This result revealed severe flaws in the perspective of capital arbitrage for explaining the FDI behaviors of MNCs and the need to establish new theories to better explain FDIs by burgeoning MNCs. As espoused in his doctoral dissertation, Hymer conducted an in-depth analysis of the factors behind the formation of MNCs based on his question “why do FDIs occur?”
Following Hymer (1960), Buckley & Casson (1976), Dunning (1977), and other scholars have also explained the internationalization behaviors of firms. Due to the background at the time, most theoretical studies and theories in the analytical framework were based on firms in developed countries, especially manufacturing firms, explaining their internationalization behavior in detail. However, since the 21st century, with the deepening of economic globalization, internationalization behaviors are no longer limited to firms in developed regions, as many firms in emerging markets have also started their internationalization. In addition, the booming internationalization of the service industry has become a hot topic in recent years. It seems that part of these changes cannot be explained by the existing IB theory.
This study thus used the pioneering results of Hymer (1960) as the starting point to review and clarify the MAT, internalization theory, and OLI paradigm by reviewing the literature on the relationships between the motivation of firm internationalization and three types of advantages: firm-specific advantages, internalization-incentive advantages, and location-specific advantages. This study also reviews the empirical literature and related studies in seven major IB journals from 1972 to 2022 and identifies new themes from the latest studies that can provide scope for future research (Journal of International Business Studies, International Business Review, Journal of World Business, Review of World Economics, International Marketing Review, Journal of International Management, and Management International Review). In addition, several other representative studies are cited in this paper. This study thus provides a comprehensive understanding of IB research to date and, to some extent, predicts the direction of future research. Furthermore, it provides practical insights on the internationalization of enterprises.