36 terms

Chapter 6

comparative advantage
superior features of a country that provide unique benefits in global competition typically derived from either natural endowments or deliberate national policies
comparative advantage inherited resources
labor, climate, arable land, petroleum reserves
comparative advantage acquired over time
entrepreneurial orientation, availability of venture capital, innovative capacity
competitive advantage
organizational assets and competencies that are difficult to imitate and thus help firs enter and succeed in foreign markets
national and firm level theories
theories of international trade and investment
national level theory
why do nations trade?
national level theory
how can nations enhance their competitive advantage?
firm level theory
why and how do firms internationalize?
firm level theory
how can internationalizing firms gain and sustain competitive advantage?
the belief that national prosperity is the result of a positive balance of trade achieved by maximizing exports and minimizing imports
neo mercantilism
believes that a trade surplus is beneficial
free trade
the relative absence of restrictions to the flow of goods and services between nations - is generally superior approach and should produce the following outcomes
absolute advantage principle
a country benefits by producing only those products in which it has absolute advantage or that it can produce using fewer resources than another country
comparative advantage principle
it can beneficial for two countries to trade without barriers as long as one is relatively more efficient at producing goods and services needed by the other
international product life cycle
each product and its manufacturing technologies go through three stages of evolution ( introduction, maturity, standardization)
new trade theory
increasing returns to scale, especially economies of scale are important for superior international performances in industries that succeed best as their production volume increases
MP' s diamond model
firm strategy structure & rivalry, factor conditions, demand conditions, related & supporting industries
firm strategy structure
the nature of domestic rivalry and conditions in a nation that determine how firms are created organized and managed
factor conditions
describes the nations position in factors of production such as labor, natural resources, capital, technology, entrepreneurship and know-how.
demand conditions
refer to the nature of home- market demand for specific products and services
related & supporting industries
refer to the presence of clusters of suppliers, competitors and complementary firms that excel in particular industries
industrial cluster
refers to a concentration of business, suppers and supporting firms in the same industry at a particular geographic location, characterized by a critical mass of human talent , capital or other factor endowments
national industrial policy
a proactive economic development plan initiated by the government often in collaboration with the private sector that aims to develop or support particular industries within the nation
internationalization process of the firm
domestic focus
pre-export stage
experimental involvement
active involvement
committed involvement
domestic focus
acquiring business in the home market
pre export stage
management investigates the feasibility of undertaking international business
experimental involvement
initiating limited international activity in the form of basic exporting
active involvement
systematic exploration of international options
monopolistic advantage theory
suggest that firms which use FDI as an internationalization strategy must own or control certain resources and capabilities not easily available to competitors
internationalization theory
firms acquire and retain one or more value-chain activities inside the firm minimizing the disadvantages of dealing with external partners and allowing for greater control over foreign operations
dunnings eclectic paradigm
specifies three conditions that determine whether a company will internationalize via FDI
ownership specific advantages
it should hold knowledge, skills, capabilities, key relationships and other assets that allow it to compete effectively in foreign markets
location specific advantages
the comparative advantages available in individual foreign countries such as natural resources, skilled labor, low cost labor and inexpensive capital
internationalization advantages
the benefits the firm derives from internationalizing foreign based manufacturing, distribution or other stages in its value chain
international collaborative ventures
a form of cooperation between two or more firms; equity and non equity based
networks and relational assets
represent the economically beneficial long term relationships the firm undertakes with other business entities such as manufactures, distributors, suppliers, retailers