An Evolutionary Approach to Understanding International Business Activity: The Co-Evolution of MNEs and the Institutional Environment

Journal of International Business Studies, Vol. 41, No. 4, pp. 567-86, 2010 (this version is longer than the published paper)

46 Pages Posted: 12 Oct 2009 Last revised: 13 Oct 2010

See all articles by John A. Cantwell

John A. Cantwell

Rutgers Business School - Newark and New Brunswick

John H. Dunning

Reading University

Sarianna M. Lundan

University of Bremen

Date Written: April 15, 2009

Abstract

This paper examines the co-evolution of MNE activities and institutions external and internal to the firm. We develop a theoretical framework for this analysis which draws on the more recent writings of Douglass North on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness, and of Richard Nelson on the co-evolution of technology and institutions. We link historical changes in the character of MNE activities to changes in the institutional environment, and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co-evolution with the environment. We argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of MNE subsidiaries. Thus MNE agency derives from more decentralized forms of experimentation in international corporate networks, which competence-creating nodes of new initiatives can co-evolve with local institutions. Unlike in most other streams of related literature, our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms. This form of co-evolutionary analysis is increasingly important to understanding the interrelationships between MNE activities and public policy.

Keywords: Theory of FDI and the MNE, Institutional Theory, Evolutionary Economics, Historical Adaptation

JEL Classification: F23, M21, B25, N8

Suggested Citation

Cantwell, John A. and Dunning, John H. and Lundan, Sarianna M., An Evolutionary Approach to Understanding International Business Activity: The Co-Evolution of MNEs and the Institutional Environment (April 15, 2009). Journal of International Business Studies, Vol. 41, No. 4, pp. 567-86, 2010 (this version is longer than the published paper). Available at SSRN: https://ssrn.com/abstract=1486054

John A. Cantwell

Rutgers Business School - Newark and New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

John H. Dunning

Reading University

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom
+44 0 1491 628 602 (Phone)
+44 0 1491 628 602 (Fax)

Sarianna M. Lundan (Contact Author)

University of Bremen ( email )

FB 7
Hochschulring 4
Bremen, D-28359
Germany

HOME PAGE: http://www.img.uni-bremen.de

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