Theory
International business has existed as a distinct field of study for the past three decades, but it does not have a widely accepted explanatory theory on which to base its uniqueness as a discipline. David Ricardo's theory of comparative advantage, Raymond Vernon's product life cycle, John Dunning's eclectic theory and all others are essentially explanations of business between domestic firms or regions, as well as international firms. They explain "multidomestic" investment and intra-national trade. Those theories offer important insights into the functioning of firms in business anywhere, including international firms, but they fail to focus on the distinguishing characteristics of business operating among different nations. Since international business is the study of business activities that cross national borders and, therefore, is fundamentally concerned with the firms that undertake that business and the national Governments that regulate them, a theory that is unique to such business must explain the responses of businesses to government policies and the policy-making of Governments themselves towards international firms. Empirical studies have distinguished international from domestic business strategies and operations, but they have not resulted in an international theory of cross-national business behaviour. The lack of a proper theoretical focus has diverted the discipline from an emphasis on policy and on conflicts and cooperation among corporations and Governments. A framework for constructing such a theory can be built on existing bargaining theory.
