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STRATEGIC CAPITAL BUDGETING DECISIONS AND THE THEORY OF INTERNALISATION

Alan M. Rugman (Professor of International Business)
Alain Verbeke (Visiting Professor of International Business Faculty of Management, University of Toronto, 246 Bloor Street West, Canada M5S 1V4)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 February 1990

528

Abstract

The capital budgeting decision for a multinational enterprise needs to take into account concepts of business policy and competitive strategy. From the modern theory of the multinational enterprise, i.e., the theory of internalisation, it is recognised that proprietary firm specific advantages yield economic rents when exploited on a world‐wide basis. Yet the multinational enterprise finds these potential rents dissipated by internal governance costs of its organisational structure and the difficulty of timing and sustaining its foreign direct investment activities. This paper examines these issues by a focus upon parent‐subsidiary relationships and the strategic nature of the capital budgeting decision for a multinational enterprise.

Citation

Rugman, A.M. and Verbeke, A. (1990), "STRATEGIC CAPITAL BUDGETING DECISIONS AND THE THEORY OF INTERNALISATION", Managerial Finance, Vol. 16 No. 2, pp. 17-24. https://doi.org/10.1108/eb013641

Publisher

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MCB UP Ltd

Copyright © 1990, MCB UP Limited

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