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International Business

International Business

Second Edition

December 2007 | 616 pages | SAGE Publications, Inc
Written by two leading international business scholars, the Second Edition of International Business takes a truly global perspective that goes beyond the United States, presents the latest concepts, tools and events and adopts integrated and problem-solving approaches for all chapters.

The book highlights the role of culture, politics and legal issues in international business and illustrates how they influence institutions, structures and processes that permeate all functions of business. This is the only international business textbook that offers dedicated discussion of small and mid-size international firms (where many students are likely to be employed) in addition to large multinational enterprises. It is also the only text to offer chapters on corruption, e-commerce, and international entrepreneurship.

The book offers a highly integrated and action-focused approach to the field that helps the reader make explicit connections across concepts and functions, develops the skill to address various IB issues and problems, and most importantly, broadens understanding of the global business environment and its repercussions for executives. In addition to superior internal integration of the various issues discussed in the book (for example this may be the only IB text where the chapter on finance and accounting has specific references to culture and how it affects those functions), the book provides easy to understand links to functional business areas, thus enabling better integration within the BA or MBA business curriculum.

This book is suitable for both undergraduate and graduate business students taking such courses as international business, international Management, Global Business, Global Business Strategy, Multinational Management, Foreign Direct Investment.

CHAPTER 1 - International Business in an Age of Globalization
OPENING CASE The Coca-Cola Company

An Age of Globalization

What Does Globalization Mean for You?

The Face of Globalization

Who Benefits from Globalization?

Globalization and the Monopoly Power of Large Corporations

Globalization and the Environment

Globalization: The Social Balance

Globalization and International Business

What is International Business?

International Versus Domestic Business

Why Do Firms Expand Internationally?

The Structure of This Book

PART ONE Concepts and Theories in International Business
CHAPTER 2 - International Trade Theory and Application

International Trade Theories

The Mercantilist Doctrine

Absolute Advantage Theory

Comparative Advantage Theory

Heckscher-Ohlin Theorem

The Leontief Paradox

Human Skills and Technology-Based Views

The Product Life-Cycle Model

Linder’s Income-Preference Similarity Theory

The New Trade Theory

INDUSTRY BOX The Global Automotive Industry

Theory Assessment

International Trade Patterns

International Trade Volume and Growth

Service Trade

Trade Measurement

Major Exporters and Importers

U.S. Trade Partners

Trade Balance

Opposition to Free Trade

The Sovereignty Argument

The Lowest-Common-Denominator Argument

Trade Reciprocity

Types of Trade Barriers

Tariff Barriers



COUNTRY BOX The United States and Steel Imports

Export Controls

Dumping and Anti-Dumping

Non-Tariff Barriers

Administrative Barriers

Production Subsidies

Emergency Import Protection

Foreign Sales Corporations

Embargoes and Boycotts

Technical Standards


Barriers to Service Trade

CHAPTER 3 - Foreign Direct Investment Theory and Application
OPENING CASE “The McDonald’s of Thai Food”

Definition and Types of Foreign Direct Investment

FDI Versus Foreign Portfolio Investment

Types of FDI

Entry Mode

The Strategic Logic Behind FDI

How MNEs Benefit from Foreign Direct Investment

Enhancing Efficiency from Location Advantages

Improving Performance from Structural Discrepancies

Increasing Return from Ownership Advantages

Ensuring Growth from Organizational Learning

The Impact of FDI on the Host (Recipient) Country


FDI Impact on Domestic Enterprises

Current Theories on FDI

Product Life-Cycle Theory

Monopolistic Advantage Theory

Internalization Theory

The Eclectic Paradigm

New Perspectives on FDI

The Dynamic Capability Perspective

The Evolutionary Perspective

INDUSTRY BOX MNEs and FDI in the Automotive Industry

The Integration-Responsiveness Perspective

Patterns of FDI

FDI Outflows

FDI Inflows

Inflows into Developing Countries

The Transnationality of Host Economies

FDI via Mergers and Acquisitions (M&As)

Intra-Regional Patterns

The Investment Environment


FDI Decision Criteria

The Lost Continent: FDI in Africa

CHAPTER 4 - The Multinational Enterprise
OPENING CASE Johnson & Johnson

What Is a Multinational Enterprise?

The Degree of Internationalization

History of the MNE

The World’s Largest MNEs

The Industry Composition of MNEs

The Growth of Service MNEs

The Image of the MNE

The MNE in the Public Eye

The Borderless Corporation: Myth or Reality?

The Competitive Advantage of the MNE

MNE’s Capabilities

The MNE from Emerging/Developing Economies (DMNE)

The Largest Developing Country MNEs

Obstacles Facing MNEs from Developing Economies

DMNE Advantage in Global Markets

Typical Features of DMNEs

COUNTRY BOX Asian MNEs in China

The Small and Medium-Size International Enterprise (SMIE)

What is an SMIE?

Obstacles to SMIE Internationalization

SMIE Advantages in Internationalization

SMIE Internationalization Features

INDUSTRY BOX Investment Banking and the SMIE

Born International

PART TWO Endowments and Environments of International Business
CHAPTER 5 - Country Competitiveness
OPENING CASE Singapore’s Competitive Advantage in the Hard Disk Drive Industry

Defining Country Competitiveness

Country Competitiveness and MNEs

Country-Level Determinants

Science, Education, and Innovation

Macroeconomic Soundness



Industry-Level Determinants

INDUSTRY BOX E-Commerce as an Element of Country Competitiveness

Firm-Level Determinants

Individual-Level Determinants

COUNTRY BOX Italy: Can Berlusconi Renew the Nation?

Government Role

CHAPTER 6 - The Cultural Environment
OPENING CASE The Goodyear-Sumitomo Alliance

What Is Culture?

Culture and International Business

Culture Does Not Explain Everything

Correlates of Culture



National Culture Classifications

Hofstede’s Dimensions of Culture

COUNTRY BOX Korea—Power Distance in the Cockpit

Schwartz’s Classification

Trompenaars and Hampden-Turner’s Classification

Other Dimensions of Culture

National Culture Clustering

Corporate Culture

Classifications of Corporate Culture

Other Layers of Culture

Key Cultural Issues

Cultural Etiquette

Cultural Stereotypes

Cultural Distance

Convergence and Divergence

INDUSTRY BOX Cultural Industries

CHAPTER 7 - The Political and Legal Environment
OPENING CASE Burger King Israel

The Political Environment

The Institutional Context

The MNE-Government Relationship

The MNE Relationship with the Host Government

The MNE and its Home Government

Coalition Building and Influence Tactics

INDUSTRY BOX EU Retaliation Against U.S. Steel Tariffs

Political Risk

The Measurement of Political Risk

Regional-Level Politics

Micro-Region Political Processes

The Legal Environment

The Institutional Context

COUNTRY BOX Indonesia: Manufacturers Life in Indonesia

Legal Jurisdiction

Regional Jurisdiction

National Jurisdiction

Legal Issues of Interest to the MNE

Rule of Origin Laws

Competition Laws

Marketing and Distribution Laws

Product Liability Laws


Patent Laws

PART THREE Global Markets and Institutions
CHAPTER 8 - International Economic Integration and Institutions
OPENING CASE M’s Response to European Market Integration

International Economic Integration

Global-Level Cooperation Among Nations

The World Trade Organization (WTO)

COUNTRY BOX China: China Joins the WTO

The International Monetary Fund (IMF)

The World Bank Group

Other International Economic Organizations

Regional-Level Cooperation Among Nations

Postwar Regional Integration

North America: The North American Free Trade Agreement (NAFTA)

Europe: The European Union (EU)

Asia Pacific

Latin America

Africa and the Middle East

Regionalization vs. Globalization

Commodity-Level Cooperation Among Nations

Organization of Petroleum Exporting Countries (OPEC)

The Multifiber Arrangement (MFA)

Strategic Responses of MNEs

INDUSTRY BOX Siemens Sharpens its Focus to Respond to the Single Market

CHAPTER 9 - The International Monetary System and Financial Markets
OPENING CASE The Mexican Crisis During and

History of the International Monetary System

The Gold Standard Period (–)

The Inter-War Years and World War II (–)

The Bretton Woods System (–)

The Post-Bretton Woods System (–Present)

Contemporary Exchange Rate Systems

Fixed-Rate System

Crawling Peg System

COUNTRY BOX Hong Kong: Can the Hong Kong Dollar Retain the Fixed Peg to the U.S. Dollar?

Target-Zone Arrangement

Managed Float System

Independent Float System

Advantages and Disadvantages of the Floating System

Determination of Foreign Exchange Rates

Purchasing Power Parity (PPP)

Interest Rate Parity (IRP)

Implications for MNEs: Foreign Exchange Forecasting

The Balance of Payments

Current Account

Capital Account

Official Reserves Account

International Foreign Exchange Market

Landscape of the International Foreign Exchange Market

Market Participants and Functions

Foreign Exchange Rate Quotations

Transaction Forms

Foreign Exchange Arbitrage

Black Market and Parallel Market

International Capital Markets

International Money Markets

International Bond Markets

INDUSTRY BOX Foreign Companies Borrow in Cheap U.S. Bond Market

International Stock Markets

International Loan Markets

The Asian Financial Crisis

The Financial Perspective

The Political/Institutional Perspective

The Managerial Perspective

PART FOUR International Business Strategies
CHAPTER 10 - International Entry Strategies
OPENING CASE DuPont’s Entry Strategies into China

International Location Selection (Where)

Locational Determinants

COUNTRY BOX Federal Express Selects Subic Bay

Decision Framework

Timing of Entry (When)

Early-Mover Advantages

Early-Mover Disadvantages

Decision Framework

Entry Mode Selection (How)

Entry Mode Choices

Trade-Related Entry Modes

Transfer-Related Entry Modes

FDI-Related Entry Modes

Decision Framework

Greenfield Investment, Acquisition, and Merger

The Evolutionary Entry Path

INDUSTRY BOX Unilever’s Acquisitions in Latin America

CHAPTER 11 - Organizing and Structuring Global Operations

International Strategy and Organization Design

Global Integration and Local Responsiveness

MNE Strategy and Design

Subsidiary Roles and Imperatives

MNE Organizational Structures

The National Subsidiary Structure

The International Division Structure

The Global Functional Structure

The Global Geographic Structure

COUNTRY BOX Regional Headquarters in Asia: The EU Versus Asia

The Global Product Structure

INDUSTRY BOX Global Product Design at the Ford Motor Company

The Global Matrix Structure

The Mixed Structure

Integrating Global Operations

Tools for Global Integration

The Transition Challenge

The Role of Corporate Headquarters

CHAPTER 12 - Building and Managing Global Strategic Alliances (GSAs)
OPENING CASE Motorola and Siemens AG in Germany

Defining Global Strategic Alliances

Types of GSAs

Rationales for Building GSAs

Challenges Facing GSAs

Building Global Strategic Alliances

Selecting a Local Partner

Negotiating Alliance Contracts

Structuring Global Strategic Alliances

COUNTRY BOX Spain: Fujitsu in Spain: Barriers to Alliance Management

Managing Global Strategic Alliances

Managing Inter-Partner Learning

Exercising Managerial Control

Heightening Cooperation

Thinking Ahead of Exit

INDUSTRY BOX Experience of Building GSAs in Corning and Emerson

CHAPTER 13 - Managing Global Research and Development (R&D)
OPENING CASE Managing Global R&D at Nestlé

Why Globalize R&D?

Benefits and Challenges of Global R&D

COUNTRY BOX India: R&D Centers of Global Companies in India

Designing and Structuring Global R&D

Type of Foreign R&D Units

Selecting R&D Location

INDUSTRY BOX Ford Locates its R&D Center in Aachen, Germany

Structuring Global R&D Activities

Managing and Operating Global R&D

Human Resource Management

Autonomy Setting

Global Planning

Communication Improvement

Technology Transfer Across Borders

PART FIVE Functional IB Areas
CHAPTER 14 - Financial Management for Global Operations
OPENING CASE Minimizing Exposure in RTZ

Why Learn Financial Management?

International Trade Finance

International Trade Payment

Export Financing

Financing for Global Business

Intercompany Financing

Equity Financing

Debt Financing

Local Currency Financing

Financing Decisions

Managing Foreign Exchange Risk and Exposure

Foreign Exchange Risk and Exposure

Transaction and Economic Exposures

Managing Transaction Exposure

Managing Economic (Operating) Exposure

INDUSTRY BOX Netting in Philips

Global Coordination of Exposure Management

COUNTRY BOX Latin America: Eight Hedging Techniques in Latin America

Working Capital Management

Cash Management

Foreign Receivable Management

CHAPTER 15 - International Accounting for Global Operations
OPENING CASE Compaq Won the Case

Country Differences in Accounting

Why Accounting Systems Differ Among Countries

INDUSTRY BOX Accounting Diversity in Volvo

National Accounting Zones

International Accounting Harmonization

International Accounting Standards

COUNTRY BOX Australia: Accounting in Australia

Foreign Currency Translation

Commonly Used Translation Methods

Harmonization of Translation Methods

International Accounting Information Systems

Transfer Pricing and Taxation Strategies

Why Transfer Pricing?

Transfer Pricing Techniques

Transfer Pricing Regulations and Penalties

Tax Havens, Treaties, and Strategies

Tax Havens

Tax Treaties

Other Tax Strategies for MNEs

CHAPTER 16 - Global Marketing and Supply Chain
OPENING CASE Domino’s Pizza

The International Marketing Challenge

Assessing Market Potential

Globalization and Localization in International Markets

Globalization Forces

Localization Forces

Product Adaptation

COUNTRY BOX The Kimchi Doctors

Country-of-Origin Effect


Channel Decisions


Marketing Alliances

The Global Supply Chain

The Globalization of Supply Chains

Global Sourcing

Customizing the Supply Chain


Transportation Modes

INDUSTRY BOX Global Logistics at Wal-Mart

Crossing National Borders

CHAPTER 17 - Global Human Resource Management

Strategic IHRM

Staffing the MNE

The Globalization of Boards of Directors

INDUSTRY BOX The Globalization of the Board of Directors in Different Industries

COUNTRY BOX The Globalization of Boards Across the Globe

Staffing the MNE Ranks

Country-Specific Issues

The Expatriate Workforce

Types and Distribution of Expatriates

Using Expatriates: Pros and Cons

Expatriate Failure

Expatriate Selection

Preparing for Foreign Assignment


Culture and Compensation


HRM in International Affiliates

Human Resource Problems in Foreign Affiliates

Preparing for an Assignment in a Foreign Affiliate

PART SIX Emerging Issues in International Business
CHAPTER 18 - Global Internet and E-Commerce
OPENING CASE Otis Elevator

Internet and E-Commerce Diffusion

Comparative Internet Demographics

E-Commerce around the Globe

COUNTRY BOX Nepal: The Internet in Nepal



Information Security

E-Business Climate

National E-Readiness

Cross-Border E-Commerce

The Impact of E-Commerce on International Business

Global E-Commerce Challenges

Standardization Forces

Localization Challenges

Taxation Issues

INDUSTRY BOX Taxing Digitized Products

CHAPTER 19 - Ethics and Corruption in the Global Marketplace

Ethics and Corruption in International Business

Definition and Magnitude of Corruption

The Origins of Corruption

Drawbacks of Corruption

Corruption Rankings

Types of Corrupt Practices


Money Laundering

Piracy and Counterfeiting

INDUSTRY BOX Piracy in the Global Software Industry

Bribe Paying

The Foreign Corrupt Practices Act (FCPA)

The Globalization of the Fight Against Corruption

COUNTRY BOX China: Counterfeiting and Piracy in China

CHAPTER 20 International Entrepreneurship
OPENING CASE Japanese Entrepreneurs in Hawaii

Defining International Entrepreneurship

Comparative Entrepreneurship

Culture and Entrepreneurship

Funding New Ventures

Cross-Border Entrepreneurship

Internationalizing the Born Global Enterprise

INDUSTRY AND COUNTRY BOXES Israeli Start-Ups in the Global Market Place

Chapter Summary

APPENDIX The OECD Guidelines for Multinational Enterprises
Organization Index
Name Index
Subject Index

"Offering an integrated, 'reader friendly', practical, and 'real-world' approach to the analysis and conduct of doing business in a global market.  International Business is an ideal classroom text book for college courses and a welcome, core addition to Business School and Academic Libarary Reference Collections."  —THE MIDWEST BOOK REVIEW

Able Greenspan
The Midwest Book Review

Very similar to our current text.

Mr Thomas Cottam
Newcastle Business School, Northumbria University
December 30, 2013

this book has provided good case studies and relevant real case example. Have a few in our library

Ms Yus aznita Ustadi
Faculty of Admin & Policy Studies, Mara University of Technology
December 14, 2011

Very detailed information - good for supplementary reading

Dr Anja Kirsch
Lehrstuhl für Personalpolitik (Dept of Human Resource Management and Labor Politics), Freie Universität Berlin
September 20, 2011

Very well structured book, which helps us to follow our intended introduction to international business from the macro to the micro level by covering all essential topics.

Ms Anna Strutzenberger
Department of International Management, Johannes Kepler University of Linz
October 12, 2010

Oded Shenkar

Oded Shenkar is Ford Motor Company Chair in Global Business Management and Professor of Management and Human Resources at the Fisher College of Business, the Ohio State University; and has taught in China, Japan, Israel and the UK. He holds B.A. and MSc.soc degrees in East Asian Studies and Sociology from the Hebrew University of Jerusalem, and M.Phil and PhD degrees from Columbia University. In addition to strategic alliances, his main areas of interest are cross-border investment and the impact of culture on international business. He has published numerous articles in the Academy of Management Review, the Academy of Management Journal,... More About Author

Yadong Luo

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ISBN: 9781412949064