International Business And Multinational Corporations

The end of the 1980s experienced a visible change experienced in the literature concerning MNE functions and nature of business (Segal-Horn and Faulkner, 2010). Before 1980s, the main research in MNE field was about analyzing relation between affiliates and headquarters of the firm, and also decisions concerning making investment in foreign country, which was also experienced in Dunning’s work. After that, the focus was shifted to operations concerning coordination in management of a network of affiliates of an MNE and analysis of the competitive advantages received by these affiliates from the respective economies. Therefore, the last 20 years have experienced a very beneficial theoretical work in the field of international business and†¦show more content†¦Their main aim is to maximize the competitive advantage for the particular MNE through integration of global activities and local differences within each foreign unit. In the modern perspective, two main theories, i.e. network-based theory and knowledge-based theory of MNE, are prevalent, which are explained hereunder (Forsgren, 2008). The most importance sources of competitive advantage for MNEs are their affiliates. This is because affiliates establish a deep-rooted and long-term connection with their local partners and through this new knowledge information can be established. Such knowledge is implicit and is inserted in a particular context. Inserted or embedded knowledge itself is implicit and is also specific to a context (Pedersen, 2014). It is also entrenched in the inter-dependent activities of the employees and staff members who observe shared experiences as well as values. These traits cause more complexity and confusions in terms of barriers for transferability of such knowledge (Stephan, 2013). This affiliate embeddedness in relation with stakeholders within the business network actually opposes business contact made traditionally, in which firm used to make connections with only consumers and suppliers and relation used to end with the exchange (Lundan, 2002). Similarly, some of these relationships w ith affiliates are established gradually with the passage of time and thus higher level of