International Business

Abstract

International business refers to economic activities across the boundaries of nation–states, of which trade and foreign investment are the most important. While theories of trade remain the province of economics, foreign investment has been approached from three main perspectives. The economic approach emphasizes the importance of cross-border differences in factor endowments, costs, and productivities as well as of transaction costs that make the multinational firm a more efficient form of organization than arm's length transactions between purely domestic firms or individuals. The managerial approach, by contrast, focuses on how multinationals are organized and how different markets are approached. The sociopolitical approach primarily deals with the role of multinationals in economic development and in international relations. Recent trends toward globalization have made the study of international business even more important, and demand more research on how trade and foreign investment affect various parts of the world.