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The dominant paradigm of world trade patterns posits two principal features. Trade between North and South arises due to traditional comparative advantage. Trade within the North, largely intra-industry trade, is based on economies of scale and product differentiation. The paradigm specifically denies an important role for endowment differences in determining North–North trade. We demonstrate that trade in factor services among countries of the North is systematically related to endowment differences and large in economic magnitude. Intra-industry trade, rather than being a puzzle for a factor endowments theory, is instead the conduit for a great deal of this factor service trade.

The eclectic paradigm is one of the most enduring frameworks in international business today. It is difficult to find a major area of international business thinking and research that has been unaffected, either directly or indirectly, by Dunning’s articulation of the nature of multinational enterprise (MNE) production and the factors affecting the distribution of MNE activity. His structuring of the factors underlying the choice of production location and internalization of intermediate product transactions laid the foundation for much of the research conducted over the last three decades on the distribution and character of the global operations of multinational corporations. More indirectly, the deeper questions raised by Dunning’s work, as well as the criticisms leveled at it, have spawned an ever widening array of research thought. The continuing importance of this work can be seen in the fact that, today still, even the earliest work on the eclectic paradigm continues to be cited by scholars at a fairly steady rate (see Chandy & Williams, 1994; Phene & Guisinger, 1998).¹

Nearly all international trade takes place in middle products, rather than in finished goods as it is assumed in most models of international trade theory. Recognition of this fact has some far-reaching consequences for the measurement of real value added, real domestic income, and productivity, and it brings forward the role of a number of related, yet distinct, key price ratios: the terms of trade, the real exchange rate, and the trading gains. Production theory, rather than consumer theory, is therefore the appropriate setting for analyzing issues such as openness, trade imbalances, and income distribution.

The collection of essays in this volume provides fairly comprehensive analyses of contemporary theoretical and policy issues in international trade. As technological revolution eliminates communications costs and the countries gear towards more open trade regimes through negotiations at the WTO, the world effectively gets smaller. The evolution of research in trade theory and policy has closely followed the trends in global economy. Issues such as how trade affects distribution of income across and within nations, generates resources for growth, leads to bilateral and multilateral cooperation and conflicts, and many others have been picked up and analyzed systematically in various chapters of this volume. Before we go into the details of the relevant sections and constituent chapters, it is worthwhile to emphasize two special features of this volume.

Our study proposes a resource environment view (REV) of competitive advantage by unpacking the environmental origins of a firm’s competitive advantage. The key tenet of the REV is that the heterogeneity and imperfect mobility of strategic factor markets and institutions across countries explain how firms based in different countries would likely both create and sustain a competitive advantage. In particular, our study introduces the notion of “the paradox of environmental embeddedness.” The paradox lies in the fact that the same environmental conditions – in terms of strategic factor markets and institutions – that enable firms to create a competitive advantage can paradoxically also create a situation in which it is more difficult for these firms to sustain an advantage. Another important aspect of our study is that, to enhance our understanding of how firms manage the paradox of environmental embeddedness, our study specifies the resource environmental conditions under which firms’ internal and external resource-oriented strategies – that is, the development of dynamic capabilities and interventions in the country resource environment – are more beneficial when managing the environmental paradox. Overall, our theorizing has important implications for strategic management theory and practice.

We examine the effect of borrowing constraint facing new immigrants on the process of their assimilation in the new society. We shall do so in a two-period model. In period 1, immigrants invest, with some costs to them, in trying to assimilate. The probability of success in this endeavor depends on the amount invested and also on the level of the provision of a “public” good paid for by lump-sum taxation of “natives”. Those who succeed enjoy a higher level of productivity and therefore wages in period 2. The level of investment is endogenously determined. Assimilation also affects remittances by immigrants. Given this framework, we examine the effect of public support on the degree of assimilation and income repatriation. We do so under two scenarios regarding the credit market facing new immigrants. In the first, they can borrow as much as they want in period 1 at an exogenously given interest rate. In the second scenarios, there is a binding borrowing constraint. We compare the equilibrium under the two scenarios.