The Impact of International Business Theory on Understanding International Business - Essay Example

 The Impact of International Business Theory on Understanding International Business Introduction Any international business theory is vital to explaining its perspective on running of MNCs and how they can be used to make the international businesses a success (Aharoni, 1966). My part 1 essay discussed how language differences between a foreign and a host country play a role in their ties and business. This essay will take this further and use theoretical reasoning perspective and relate it to how it has developed my personal understanding of the real business world. International Business Theory and its Implications Basically, in political economy, but also in a business setting, the theory of inter-organizational bargaining can be utilized to characterize and make an analysis of business and government negotiation, policy formulation and trends (Aharoni, 1966). This theory places an emphasis on the relative bargaining resources and the stakes of every person involved in a bargaining scenario, hence deducing economical and commercial ideas from the analysis. Since any business can be involved in power relationships with competing companies, bargaining theory may include in both the MNC and the host government negotiations the capable reaction from other related MNCs (Audretsch, 1989). Vital phenomena such as the bargain trade limitations and performance obligations can be reflected by critical analysis using this theory. Policies of MNCs and host governments can be incorporated with power relationships resulting in compromising and working together as well as rivalry with other MNCs. The bargaining theory model, hence is apparent and able to entail numerous considerations such as the ones already named. Firm strategies and the host government rules, laws, policies and regulations may emanate from the decision makers aspect of their own bargaining powers and those of other crucial actors, in addition to their analysis of opportunity costs and their ability to forego any dealings with potential rival MNCs wishing to operate in the host country (Blomkvist, 2012). Among the numerous actors who are important to policy making, MNC does comprise a specific vital group, changes the balance of payments, aid in the country’s overall development, develop and improve on the existing technology and have an impact on other policy fields. Host governments are vital in influencing MNC’s strategies, since they fix the regulations of the negotiation game, even if language differences take precedent. Such requirements can result to the bargaining relationship between the MNC and the host government. Moreover, a relationship can be observed as a joint maximizing problem as compared to the Game Theory, where every side requiring pursuing its motives can be limited by its resources, its dependability on the other party and its link with the other crucial actors (Minbaeva et al, 2003). Thus, international business findings, which emerge from the relationship between the MNC and the host government can be scrutinized in-depth in the framework of various international business models. It must be noted that international business theory must explain how the problems of the host government concerning MNC actions can be defined, how will they be negotiated, what actions can be needed, how variations can be solved, and which critical alterations can be implemented over time and the reasons behind that (Minbaeva, 2005). A unique international business theory must explain the trends of exports and imports, the benefits obtained from the trade, the firm techniques to be used, all kinds of contractual links, policies and actions in international trade and all of those as they can be influenced by government’s interventions occurring in a unilateral or multilateral; way, hence giving rise to various sets of policies for international business (Minbaeva, 2008). The importance of such a theory is that it must strive to give explanations on the different issues and incentives to foreign MNCs imposed by the host governments in an effort to change the pattern of gains, and the impacts of such policies on MNCs choices and actions. Moreover, it must stress on the effects of MNCs’ reaction towards the host government policies. The formulation of a solid theoretical foundation usually needs a number of years as the objective of the discipline can be established (Riege, 2007). Despite the reality that both academic and managerial interest in international business growing fast with the increase of businesses internationally, the application of theories of international business seeks mainly, though not outwardly, to increase the field of their analysis without infusing reactions of the MNCs to national rules and policies or the cause of such governmental stands. Yet, government interventions are essential to international business practice in the real world. The theory of international business must be a theory of actions and regulations of MNCs and the host government, in problem resolution and the aspect of cooperation (Tong & Wang, 2004). Though there have been numerous researches of international business relationships between MNCs and the host governments, there is certainly some misconception over the depth of the international business field, with some relating it on theoretical approach and others from an empirical and evidential point of view. Conclusion and Recommendations Therefore, international business theory is more or less a policy aspect, that is, entailing business and government policies relating to those policies which accentuate to international companies as opposed to just domestic companies. An analysis of international operations of firms which makes an assumption of governments as given or unfaltering removes the ‘national’ out of international and makes the analysis as a basic extension of company and market theories. To do so results to misconceived or meaningless policy perceptions (Wasko & Teigland, 2009). That observation is not to sway anyone from the knowledge acquired via the usage of business models to comprehend the global economical and commercial operations of companies. The international business theory, based on my previous essay done, tends to offer numerous meaningful analyses of business actions even when the aspect of language differences comes into question during the entry into a new foreign market by the MNCs. From various observations, it can also be concluded that though the international business theory has served its purpose in making persons understand and have adequate knowledge of international business activities, it also has its own imperfections generally (Wu & Lee, 2012). Furthermore, international business theory provides the best knowledge concerning intercompany rivalry, and offers certain guidelines in observing the efficiency and effectiveness of the host government policies and regulations. They also permit solely a limited comprehension of government to MNCs relationships and of equity problems. Thus, international business theory requires emphasizing on the analysis of what can be attributed to be unique. References Aharoni, Y. (1966). The Foreign Investment Decision Process. Boston: Harvard Business School. Audretsch, D. (1989). The Market and the State. New York: New York University Press. Blomkvist, K. (2012). Knowledge management in MNCs: The importance of subsidiary transfer Performance. Journal of Knowledge Management, 16(6), 904-918. Minbaeva, D, Pedersen, T. Bjorkman, I., Fey, C.F., Park, HJ (2003). MNC knowledge transfer, Subsidiary absorptive capacity and HRM. Journal of International Business Studies, 34. P586- Minbaeva, D. (2005). HRM practices and MNC knowledge transfer. Personnel Review, 34(1), 125-144. Minbaeva, D. (2008). HRM practices affecting extrinsic and intrinsic motivation of Knowledge receivers and their effect on intra-MNC knowledge transfer. International Business Review, 17(6), 703-713. Riege, A. (2007). Actions to overcome knowledge transfer barriers in MNCs. Journal of Knowledge Management, 11(1), 48-67. Tong, T. & Wang, P. (2004). An integrated model of knowledge transfer from MNC parent To china subsidiary. Journal of World Business, 39(2), 168-182. Wasko, M. & Teigland, R. (2009). Knowledge transfer in MNCs: Examining how intrinsic Motivations and knowledge sourcing impact individual centrality and performance. Journal of International Management, 15(1), 15-31. Wu, W. & Lee, Y. (2012). Absorptive capacity and MNC knowledge transfer: The Organizational behavior perspective. International Business and Economics Research Journal, 11(8), 943-950. 599 Read More