Coase and international business: the origin and development of internalisation theory

The internalisation theory of the multinational enterprise is a significant intellectual legacy of Ronald Coase. US direct investment in Europe became highly political in the 1960s, and neoclassical trade theory had no explanation. A theory of the multi-plant enterprise was required, and internalisation theory filled this gap. Using Coasian economics to explain the ownership of production plants, and the geography of trade to explain their location, internalisation theory offered a comprehensive account of MNEs and their role in the international economy. This paper outlines the development of the theory, explains the Coasian contribution, and examines in detail the early work of Hymer, McManus and Buckley and Casson. It then reviews the current state of internalisation theory and suggests some future developments.

A continuum receptor model of hepatic lipoprotein metabolism

A mathematical model describing the uptake of low density lipoprotein (LDL) and very low density lipoprotein (VLDL) particles by a single hepatocyte cell is formulated and solved. The model includes a description of the dynamic change in receptor density on the surface of the cell due to the binding and dissociation of the lipoprotein particles, the subsequent internalisation of bound particles, receptors and unbound receptors, the recycling of receptors to the cell surface, cholesterol dependent de novo receptor formation by the cell and the effect that particle uptake has on the cell's overall cholesterol content. The effect that blocking access to LDL receptors by VLDL, or internalisation of VLDL particles containing different amounts of apolipoprotein E (we will refer to these particles as VLDL-2 and VLDL-3) has on LDL uptake is explored. By comparison with experimental data we find that measures of cell cholesterol content are important in differentiating between the mechanisms by which VLDL is thought to inhibit LDL uptake. We extend our work to show that in the presence of both types of VLDL particle (VLDL-2 and VLDL-3), measuring relative LDL uptake does not allow differentiation between the results of blocking and internalisation of each VLDL particle to be made. Instead by considering the intracellular cholesterol content it is found that internalisation of VLDL-2 and VLDL-3 leads to the highest intracellular cholesterol concentration. A sensitivity analysis of the model reveals that binding, unbinding and internalisation rates, the fraction of receptors recycled and the rate at which the cholesterol dependent free receptors are created by the cell have important implications for the overall uptake dynamics of either VLDL or LDL particles and subsequent intracellular cholesterol concentration. (C) 2008 Elsevier Ltd. All rights reserved.

Diverse signalling by different chemokines through the chemokine receptor CCR5

We have investigated the signalling properties of the chemokine receptor, CCR5, using several assays for agonism: stimulation of changes in intracellular Ca2+ or CCR5 internalisation in CHO cells expressing CCR5 or stimulation of [S-35]GTP gamma S binding in membranes of CHO cells expressing CCR5. Four isoforms of the chemokine CCL3 with different amino termini (CCL3, CCL3(2-70), CCL3(5-70), CCL3L1) were tested in these assays in order to probe structure/activity relationships. Each isoform exhibited agonism. The pattern of agonism (potency, maximal effect) was different in the three assays, although the rank order was the same with CCL3L1 being the most potent and efficacious. The data show that the amino terminus of the chemokine is important for signalling. A proline at position 2 (CCL3L1) provides for high potency and efficacy but the isoform with a serine at position 2 (CCL3(2-70)) is as efficacious in some assays showing that the proline is not the only determinant of high efficacy. We also increased the sensitivity of CCR5 signalling by treating cells with sodium butyrate, thus increasing the receptor/G protein ratio. This allowed the detection of a change in intracellular Ca2+ after treatment with CCL7 and Met-RANTES showing that these ligands possess measurable but low efficacy. This study therefore shows that sodium butyrate treatment increases the sensitivity of signalling assays and enables the detection of efficacy in ligands previously considered as antagonists. The use of different assay systems, therefore, provides different estimates of efficacy for some ligands at this receptor. (c) 2006 Elsevier Inc. All rights reserved.

Bacterial iron homeostasis

Iron is essential to virtually all organisms, but poses problems of toxicity and poor solubility. Bacteria have evolved various mechanisms to counter the problems imposed by their iron dependence, allowing them to achieve effective iron homeostasis under a range of iron regimes. Highly efficient iron acquisition systems are used to scavenge iron from the environment under iron-restricted conditions. In many cases, this involves the secretion and internalisation of extracellular ferric chelators called siderophores. Ferrous iron can also be directly imported by the G protein-like transporter, FcoB. For pathogens, host-iron complexes (transferrin, lactoferrin, haem, haemoglobin) are directly used as iron sources. Bacterial iron storage proteins (ferritin, bacterioferritin) provide intracellular iron reserves for use when external supplies are restricted, and iron detoxification proteins (Dps) are employed to protect the chromosome from iron-induced free radical damage. There is evidence that bacteria control their iron requirements in response to iron availability by downregulating the expression of iron proteins during iron-restricted growth. And finally, the expression of the iron homeostatic machinery is subject to iron-dependent global control ensuring that iron acquisition, storage and consumption are geared to iron availability and that intracellular levels of free iron do not reach toxic levels. (C) 2003 Federation of European Microbiological Societies. Published by Elsevier Science B.V. All rights reserved.

Diverse signalling by different chemokines through the chemokine receptor CCR5

We have investigated the signalling properties of the chemokine receptor, CCR5, using several assays for agonism: stimulation of changes in intracellular Ca(2+) or CCR5 internalisation in CHO cells expressing CCR5 or stimulation of [(35)S]GTPgammaS binding in membranes of CHO cells expressing CCR5. Four isoforms of the chemokine CCL3 with different amino termini (CCL3, CCL3(2-70), CCL3(5-70), CCL3L1) were tested in these assays in order to probe structure/activity relationships. Each isoform exhibited agonism. The pattern of agonism (potency, maximal effect) was different in the three assays, although the rank order was the same with CCL3L1 being the most potent and efficacious. The data show that the amino terminus of the chemokine is important for signalling. A proline at position 2 (CCL3L1) provides for high potency and efficacy but the isoform with a serine at position 2 (CCL3(2-70)) is as efficacious in some assays showing that the proline is not the only determinant of high efficacy. We also increased the sensitivity of CCR5 signalling by treating cells with sodium butyrate, thus increasing the receptor/G protein ratio. This allowed the detection of a change in intracellular Ca(2+) after treatment with CCL7 and Met-RANTES showing that these ligands possess measurable but low efficacy. This study therefore shows that sodium butyrate treatment increases the sensitivity of signalling assays and enables the detection of efficacy in ligands previously considered as antagonists. The use of different assay systems, therefore, provides different estimates of efficacy for some ligands at this receptor.

Allosteric effects of antagonists on signalling by the chemokine receptor CCR5

Antagonists of the chemokine receptor, CCRS, may provide important new drugs for the treatment of HIV-1. In this study we have examined the mechanism of action of two functional antagonists of the chemokine receptor CCRS (UK-396,794, UK-438,235) in signalling and internalisation assays using CHO cells expressing CCR5. Both compounds were potent inverse agonists versus agonist-independent [S-3]GTP gamma S binding to membranes of CHO cells expressing CCR5. Both compounds also acted as allosteric inhibitors of CCL5 (RANTES) and CCL8 (MCP-2) -stimulated [S-35]GTP gamma S binding to CHO-CCR5 membranes, reducing the potency and maximal effects of the two chemokines. The data are consistent with effects of the allosteric inhibitors on both the binding and signalling of the chemokines. Both compounds inhibited CCR5 internalisation triggered by chemokines. When CHO-CCR5 cells were treated with either of the two compounds for prolonged periods of time (24 h) an increase (similar to 15%) in cell surface CCRS was detected. (C) 2007 Elsevier Inc. All rights reserved

Location and collocation advantages in international innovation

Purpose – This paper examines the role of location-specific (L) advantages in the spatial distribution of multinational enterprise (MNE) R&D activity. The meaning of L advantages is revisited. In addition to L advantages that are industry-specific, the paper emphasises that there is an important category of L advantages, referred to as collocation advantages. Design/methodology/approach – Using the OLI framework, this paper highlights that the innovation activities of MNEs are about interaction of these variables, and the essential process of internalising L advantages to enhance and create firm-specific advantages. Findings – Collocation advantages derive from spatial proximity to specific unaffiliated firms, which may be suppliers, competitors, or customers. It is also argued that L advantages are not always public goods, because they may not be available to all firms at a similar or marginal cost. These costs are associated with access and internalisation of L advantages, and – especially in the case of R&D – are attendant with the complexities of embeddedness. Originality/value – The centralisation/decentralisation, spatial separation/collocation debates in R&D location have been mistakenly viewed as a paradox facing firms, instead of as a trade-off that firms must make.

The economic theory of the firm as a foundation for international business theory

The economic theory of the firm is central to the theory of the multinational enterprise. Recent literature on multinationals, however, makes only limited reference to the economic theory of the firm. Multinationals play an important role in coordinating the international division of labour through internal markets. The paper reviews the economic principles that underlie this view. Optimal internalisation equates marginal benefits and costs. The benefits of internalisation stem mainly from the difficulties of licensing proprietary knowledge, reflecting the view that MNEs possess an ‘ownership’ or ‘firm-specific’ advantage. The costs of internalisation, it is argued, reflect managerial capability, and in particular the capability to manage a large firm. The paper argues that management capability is a complement to ownership advantage. Ownership advantage determines the potential of the firm, and management capability governs the fulfilment of this potential through overcoming barriers to growth. The analysis is applied to a variety of issues, including out-sourcing, geographical dispersion of production, and regional specialisation in marketing.

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.

Internalization theory: an unfinished agenda

Internalization theory is usually applied at the firm level to analyse FDI, licensing and subcontracting, but this paper extends it to the industry level. It synthesises internalisation theory and oligopoly theory. It analyses a global industry where firms innovate competitively, and freely enter and exit the industry. It presents a formal model which highlights the inter-dependencies between rival firms. Each firm responds to its rivals by jointly optimising production and innovation through inter-dependent ownership and location decisions. The competitive outcome determines which firms serve which markets, which firms enter or exit the industry, and the internalisation strategy of each firm.