The Role of Management in Internalization Theory

Previous writings on international business theory based on the internalization paradigm have prescribed only a minor role for management decision making in determining outcomes. This is a largely a function of the provenance of internalization theory from the neo-classical theory of the firm. A great deal of progress has been made in combining institutionalist arguments into the theory of the multinational firm through the central concept of internalization but this apparently leaves management decision making to play a minor role. The following section of this paper examines the role of management in the internalization approach. The third section critically examines the criticisms of the internalization approach and finds that it is capable of considerable extension. This is exemplified on pp. 55–7 by focussing on innovation in multinational firms.