Faculty for Business Studies and Economics

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 that draws on the more recent writings of Douglass North on institutions as a response to complex forms of ...

© John H. Dunning and Sarianna M. Lundan 2008 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior ...

Page 1. PERSPECTIVES Institutions and the OLI paradigm of the multinational enterprise John H. Dunning & Sarianna M. Lundan ... Keywords MNE theory . Institutions . OLI paradigm What determines the boundaries or scope of the firm? ...

This article argues that a focus on the institutional underpinnings of multinational enterprise (MNE) strategy and behavior is not only consistent with the emerging literature on dynamic capabilities, but it also serves to highlight the unique role played by MNEs in generating new organizational routines by combining locally embedded capabilities with those that are mobile across borders. Firms shape markets rather than the other way around, because of the role organizational innovation plays in redefining the rules of selection in the operating environment. Of such innovations, some proportion will remain proprietary, while others become diffused more widely in the industry, as the choices made by pioneering firms are imitated by others. We argue that the combination of increasing interconnections between geographically dispersed markets and the greater use of market-based transactions have intensified the incentives for MNEs to engage in the development of new routines, and to formalize them into transferable practices. This is likely to increase the overall transparency of the origins of firm capabilities, leading potentially to more specialization and less internalization at the industry level. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Much of the recent evidence on the internationalisation patterns of Finnish MNEs has come from analyses of the Top 30 firms. This paper uses newly available data from the Orbis database on the foreign affiliates of Finnish MNEs, and compares this to the existing sources of data from the Bank of Finland and Statistics Finland. By utilising firm-level that includes smaller internationalising firms, we are able to get a more com-prehensive picture of the international activities Finnish firms. We are also able to present an analytically grounded classification of the different types of internationalising firms in terms of the spread or entropy of their international activities. Such a classification will enable a more fine-grained measure of internationalisation in future studies that examine for example the effects of internationalisation on the home country.