Making internalization theory good for practice: the essence of Alan Rugman’s contributions to international business

This perspectives paper and its associated commentaries examine Alan Rugman's conceptual contribution to international business scholarship. Most significantly, we highlight Rugman's version of internalization theory as an approach that integrates transaction cost economics and ‘classical’ internalization theory with elements from the resource-based view, such that it is especially relevant to strategic management. In reviewing his oeuvre, we also offer observations on his ideas for ‘new internalization theory’. We classify his other novel insights into four categories: Network Multinationals; National competitiveness; Development and public policy; and Emerging Economy MNEs. This special section offers multiple views on how his work informed the larger academic debate and considers how these ideas might evolve in the longer term.

Alan Rugman’s methodology

This paper argues that the intellectual contribution of Alan Rugman reflects his distinctive research methodology. Alan Rugman trained as an economist, and relied heavily on economic principles throughout his work. He believed that one good theory was sufficient for IB studies, and that theory, he maintained, was internalisation theory. He rejected theoretical pluralism, and believed that IB suffered from a surfeit of theories. Alan was a positivist. The test of a good theory was that it led to clear predictions which were corroborated by empirical evidence. Many IB theories, Alan believed, were weak; their proliferation sowed confusion and they needed to be refuted. Alan’s interpretation of internalisation was, however, unconventional in some respects. He played down the trade-offs presented in Coase’s original work, and substituted heuristics in their place. Instead of analysing internalisation as a context-specific choice between alternative contractual arrangements, he presented it as a strategic imperative for firms possessing strong knowledge advantages. His heuristics did not apply to every possible case, but in Alan’s view they applied in the great majority of cases and were therefore a basis for management action.