Competitive Advantage and the Existence of the MNC: Earlier Research and the Role of Frictions

This paper provides a counterpoint to Buckley and Hashai’s paper “Is competitive advantage a necessary condition for the emergence of the Multinational Enterprise?”. We agree with their conclusion that it is, in fact, not a necessary condition, but argue that the theoretical reasons behind this are different and more diverse than the ones they propose. We suggest that much extant economic theory is in fact consistent with their view that firms may internationalize without owning or achieving competitive advantages, and model various other ways in which imperfections can drive their overall result. We strongly applaud Buckley and Hashai’s attempt to add more rigor to International Business theory and call for future work to extend this debate.