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Abstract
If markets were either completely isolated by or integrated across borders, there would be little room for international business strategy to have content distinctive from 'mainstream' strategy. But a review of the economic evidence about the international integration of markets indicates that we fall in between these extremes, into a state of incomplete cross-border integration that I refer to as semiglobalization. More specifically, most measures of market integration have scaled new heights in the last few decades, but still fall far short of economic theory's ideal of perfect integration. The diagnosis of semiglobalization does more than just supply a relatively stable frame of reference for thinking about the environment of cross-border operations. It also calls attention to the critical role of location-specificity in the prospects of distinctive content for international business strategy relative to mainstream business and corporate strategy. In addition, it flags factors/products subject to location-specificity as being salient from the perspective of international business. Finally, it highlights the scope for strategies that strive to capitalize on the (large) residual barriers to cross-border integration, as well as those that simply try to cope with them.
Journal of International Business Studies (2003) 34, 138-152. doi:10.1057/palgrave.jibs.8400013
Keywords: semiglobalization; globalization market integrations; market inperfections; location/location-specificity; firm strategy
Introduction
The first of the three postulates on which Buckley and Casson (1976, 32) based their theory of the multinational enterprise was that 'firms maximize profit in a world of imperfect markets.' This structural insight has proved as fruitful in international business strategy as it has in 'mainstream' (single-country) business strategy, where it has been in circulation for even longer. What is somewhat odd, however, is that work in this vein in international business strategy has tended to focus on the same sources of market imperfections as mainstream business strategy: small numbers and, often related, the business/usage-specificity of key activities, resources, competencies, capabilities, knowledge, etc., or their firm-specificity in the sense of being collectively held by the firm's managerial hierarchy or employee pool and inalienable from it. However, the obvious potential source of market imperfections added by the international dimension - the possibly limited cross-border integration of markets or, more generally, the possible location-specificity of key activities, resources, etc. - has received less attention. Location-specificity of the specific...