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This chapter focuses on the four topics pertaining to foreign direct investment (FDI) and multinational enterprises (MNEs) that are the focus of this volume: (1) managerial decision-making processes that result in FDI and internationalization; (2) the changing national origin of MNEs, particularly those spawned by emerging markets; (3) the changing scope of MNEs, as they fine-tune and globally disperse their value chains, expand into new services, and rely increasingly on networks, alliances, and offshoring to enhance global competiveness, and speed up internationalization to the point of being “born global”; and (4) the changing relationship between MNEs and home and host countries. After surveying Yair Aharoni's significant contributions in each of these areas, the chapter offers a preview of the volume's contents on each topic. It concludes with an agenda for future research by international business scholars.

We suggest that the entire world may not always be the appropriate frame of reference in analyses of Multinational Enterprises (MNEs) location choices. In some industries and activities, more narrowly defined geographic areas, such as regions and cities, are more relevant level of analyses. Employing global cities as the geographic frame of reference, we extend the theory of the location choices of MNEs by challenging the assumption that location attributes have identical values for all MNEs. Rather, we explicitly acknowledge the relative value of such attributes for individual MNEs, and search for the firm-specific characteristics that affect this variation. The empirical testing is based on analysis of 673 financial and professional service MNEs that entered New York and London via mergers and acquisitions (M&As). The findings confirm that it is the interaction between location and firm-specific attributes, rather than each of these independently, which affects location choices.

As an institution, the multinational enterprise has evolved in complexity. From having roots in just a few Western nations, it now has roots in dozens of nations, including many developing countries. Its scope has likewise expanded from natural resource-based industries and manufacturing to a variety of services. And firms are becoming multinational earlier in their lives and at smaller sizes than in the past. This chapter analyzes the evolution of multinationals over the last century, the forces driving that evolution, and distinctive characteristics of the latest wave of multinationals coming out of developing countries. It also explores the risk of a backlash against globalization and multinationals in Western societies, even as these trends gain in popularity in developing countries. It concludes with questions that international business scholars might want to pursue in their future research.

Digitalisation has become a central theme in the current economic and policy debate. Large digital and tech multinational enterprises (MNEs) are gaining an outsized role in the global economy. Also, the adoption of advanced digital technologies across all industries is fundamentally changing production processes. Both these (interrelated) phenomena have profound implications for economic structures, employment, inequality and development and industrialisation opportunities. This chapter analyses the international production and investment (i.e., foreign direct investment [FDI]) implications of the digital economy. First, it empirically documents significant differences in internationalisation patterns between the largest digital MNEs and traditional MNEs; particularly, the tendency of digital MNEs to exhibit an asset-light international footprint. Second, it argues that the powerful transformational forces related to digital adoption and the new industrial revolution have the potential to change international production more broadly, favouring a shift towards internationalisation models characterised by decentralised production, accelerated servicification and extended disintermediation. The chapter concludes with investment policy implications and a number of questions for future research.

This chapter focuses on the influence of the home government on the internationalization of Russian multinational enterprises (MNEs). It views government involvement and political connectedness as a form of informal connections and networks that seriously impact operations in general and internationalization, in particular in the case of Russian multinationals. Using the literature on MNEs from emerging markets and our familiarity with Russian business and political specificities, we develop a set of five propositions devoted to the subject. We further discuss the research and management implications of our analysis.

“First principles” of international business (IB) thinking should be applied systematically when assessing the functioning of internationally operating firms. The most important first principle is that entrepreneurially oriented firms seek to create, deliver and capture economic value through cross-border linkages. Such linkages invariably require complementary resources from a variety of parties with idiosyncratic vulnerabilities to be meshed. Starting from first principles allows bringing to light evidence-based insight. For instance, most companies are not global and even the world’s largest firms rarely change the location of key strategic functions. International new ventures (INVs), emerging economy multinational enterprises (MNEs) and family firms face unique vulnerabilities but also command resources that can be used to create value across borders. The quest for “optimal” international diversification appears to be a futile academic exercise, and in emerging economies with institutional voids, relational networks – and more broadly, informal institutions – are unlikely to function as scalable substitutes for formal institutions. In global value chains (GVCs), many lead firms and their partners have been able to craft governance mechanisms that reduce bounded rationality and bounded reliability challenges, and it is also critical for them to use governance as a tool to create entrepreneurial space. Finally, many of the world’s largest companies have been on successful trajectories toward reducing their climate change footprint for a few decades. But these firm-specific trajectories are fraught with challenges and cannot just be imposed via unilateral, macro-level targets decided upon by individuals and institutions lacking a clear understanding of innovation and capital expenditure processes in business.

We examine the impact of multinational firms (MNEs) on exchange rate pass-through when an MNE engages in Cournot competition with domestic and foreign rivals. The MNE can locate its production for the foreign market domestically — intra-firm trade (IT) — or in the foreign country — international production (IP). In addition to incomplete exchange rate pass-through, we show that an MNE increases the sensitivity of domestic market prices and reduces the sensitivity of foreign market prices to exchange rate movements. Finally, IT prices are more sensitive to exchange rate movements than their IP counterparts and react in the opposite direction.

I am honored to receive the Booz Allen Hamilton/strategy+business Eminent Scholar Award in International Management. I am even more honored to follow in the footsteps of such distinguished previous recipients of the AOM-IMD (Academy of Management-International Division) Distinguished Scholar Award as: John Child, Christopher Bartlett, Sumantra Ghoshal, John Dunning, and Yves Doz. Like them, I shall reflect here on my past contributions to scholarship, and then use this work as a building block for the major part of this paper, which is on the need for new and relevant theory in the field of international management.

The sustainability performance of multinational enterprises (MNEs) is often judged from their participation in distinct sustainability standards initiatives. But MNEs interact with a variety of sustainability standards in their value chains. This chapter proposes a partnering-intensity continuum to categorize the MNE–standards interactions to explore the benefits of a more firm-based approach for the assessment of MNEs’ contributions to sustainability.

The chapter describes standardization in coffee and biofuels industries and presents the case of a single firm to compose a continuum that reflects how MNEs move between standards attached to operations of single firms, bilateral arrangements with certification schemes, and multistakeholder partnerships. It elaborates this observed continuum by linking international business (IB) literature with the literature on global value chains (GVCs) and partnerships.

Choices about how to partner in and how to handle control over the implementation of standards shape the contributions MNEs make to sustainable development. Specifying how MNEs interact with different standards, with varying degrees of partnering and combined logics, is proposed as a better way to assess how MNEs contribute to sustainable development compared to evaluating standards per se.

This chapter draws attention to the phenomenon that international “lead firms” engage with a variety of standards. The chapter proposes that looking at partnering intensity and the subsequent level of influence over the implementation of standards enables assessing how and to what extent lead firms contribute to addressing sustainability problems.

Multinational enterprises (MNEs) own and control technological resources and capabilities that make them critical actors in accelerating the transition toward net zero. Even beyond the energy sector, stakeholders are putting increasing pressure on MNEs to reduce the carbon intensity of their operations, that is, to improve their carbon performance. While there is unambiguous evidence that national climate policy is a critical catalyst for long-term carbon performance improvements, there is limited research on how MNEs’ carbon strategies react to climate policies. This chapter reviews the concepts, drivers, and strategies connected to carbon performance in the broader sustainability and management literature to clarify potential complementarities to international business (IB). The authors then highlight how MNEs will face increasing institutional complexity along two dimensions: (1) the structural diversity of institutional environments and (2) institutional dynamism, primarily reflected by public policy. The proposed conceptual framework maps these two dimensions to national and subnational levels, and the authors present two data sources that allow the quantitative analysis of country differences in the diversity and dynamism of national climate policy. The authors conclude that there are ample opportunities for IB researchers to explore MNEs’ strategic reactions to climate policy and to inform policymakers about the consequences of national climate policy in the global economy.