Factors influencing the Internationalisation of Firms: Micro Foundations of Macro Determinants

Abstract

We draw on insights from the theory of the multinational enterprise (MNE) to explain outward investment and (thus) internationalisation. We claim that micro insights from the work of Stephen Hymer, Edith Penrose and other extant theories of the MNE can serve as micro foundations of some macro determinants of internationalisation. The focus on macrodeterminants pursues and develops an earlier critique of the theory of the MNE by Penrose; that it fails to distinguish between intra-national and inter-national expansion of firms. We propose demand-side national business cycle considerations as a Penrose-inspired answer to the Penrosean critique. Our evidence derives from USA and UK data, supports insights from Hymer, Vernon, Penrose and our response to the Penrosean challenge.