Commentary: A critical assessment of firm advantage and implications for multinationals and multinationalizing firms

Abstract

The notion of advantage is central to many of the arguments regarding the multinational enterprise (MNE), both with respect to the existence of the MNE as an institution, (i.e. why the MNE), as well as challenges in managing the MNE. In this paper, I critically examine three aspects of advantage: the firm advantage, the multinational firm advantage and the implications of advantage for multinational and multinationalizing firms. With respect to the first, I complement the market failure argument with the relational failure argument. With respect to the second, I complement the multinational as ‘internalizer of externalities’ perspective with that of the multinational as a knowledge integrator. With respect to the third, I question the (over) emphasis on extant firm specific advantages and introduce elements of entrepreneurship into the argument, shifting the emphasis from ability to agility.