International Business, Second Edition is written by the two leading IB scholars in the world, this book takes a truly global perspective that goes beyond the United States, presents the latest concepts, tools and events, and adopts integrated and problem-solving approaches for all chapters The book highlights the role of culture, politics and legal issues in international business and illustrates how they influence institutions, structures and processes that permeate all functions of business. This is the only international business textbook that offers dedicated discussion of small and mid-size international firms (where many students are likely to be employed) in addition to large multinational enterprises. It is also the only text to offer chapters on corruption, e-commerce, and international entrepreneurship. The book offers a highly integrated and action-focused approach to the field that helps the reader make explicit connections across concepts and functions, develops the skill to address various IB issues and problems, and most importantly, broadens understanding of the global business environment and its repercussions for executives.In addition to superior internal integration of the various issues discussed in the book (for example this may be the only IB text where the chapter on finance and accounting has specific references to culture and how it affects those functions), the book provides easy to understand links to functional business areas, thus enabling better integration within the BA or MBA business curriculum. This book is suitable for both undergraduate and graduate business students taking such courses as international business, international Management, Global Business, Global Business Strategy, Multinational Management, Foreign Direct Investment.

Table of Contents

CHAPTER 1 - International Business in an Age of Globalization OPENING CASE The Coca-Cola Company An Age of Globalization What Does Globalization Mean for You? The Face of Globalization Who Benefits from Globalization? Globalization and the Monopoly Power of Large Corporations Globalization and the Environment Globalization: The Social Balance Globalization and International Business What is International Business? International Versus Domestic Business Why Do Firms Expand Internationally? The Structure of This Book PART ONE Concepts and Theories in International Business CHAPTER 2 - International Trade Theory and Application OPENING CASE The Banana War International Trade Theories The Mercantilist Doctrine Absolute Advantage Theory Comparative Advantage Theory Heckscher-Ohlin Theorem The Leontief Paradox Human Skills and Technology-Based Views The Product Life-Cycle Model Linder's Income-Preference Similarity Theory The New Trade Theory INDUSTRY BOX The Global Automotive Industry Theory Assessment International Trade Patterns International Trade Volume and Growth Service Trade Trade Measurement Major Exporters and Importers U.S. Trade Partners Trade Balance Opposition to Free Trade The Sovereignty Argument The Lowest-Common-Denominator Argument Trade Reciprocity Types of Trade Barriers Tariff Barriers Tariffs Quotas COUNTRY BOX The United States and Steel Imports Export Controls Dumping and Anti-Dumping Non-Tariff Barriers Administrative Barriers Production Subsidies Emergency Import Protection Foreign Sales Corporations Embargoes and Boycotts Technical Standards Corruption Barriers to Service Trade CHAPTER 3 - Foreign Direct Investment Theory and Application OPENING CASE "The McDonald's of Thai Food" Definition and Types of Foreign Direct Investment FDI Versus Foreign Portfolio Investment Types of FDI Entry Mode The Strategic Logic Behind FDI How MNEs Benefit from Foreign Direct Investment Enhancing Efficiency from Location Advantages Improving Performance from Structural Discrepancies Increasing Return from Ownership Advantages Ensuring Growth from Organizational Learning The Impact of FDI on the Host (Recipient) Country Employment FDI Impact on Domestic Enterprises Current Theories on FDI Product Life-Cycle Theory Monopolistic Advantage Theory Internalization Theory The Eclectic Paradigm New Perspectives on FDI The Dynamic Capability Perspective The Evolutionary Perspective INDUSTRY BOX MNEs and FDI in the Automotive Industry The Integration-Responsiveness Perspective Patterns of FDI FDI Outflows FDI Inflows Inflows into Developing Countries The Transnationality of Host Economies FDI via Mergers and Acquisitions (M&As) Intra-Regional Patterns The Investment Environment COUNTRY BOX FDI in Israel FDI Decision Criteria The Lost Continent: FDI in Africa CHAPTER 4 - The Multinational Enterprise OPENING CASE Johnson & Johnson What Is a Multinational Enterprise? The Degree of Internationalization History of the MNE The World's Largest MNEs The Industry Composition of MNEs The Growth of Service MNEs The Image of the MNE The MNE in the Public Eye The Borderless Corporation: Myth or Reality? The Competitive Advantage of the MNE MNE's Capabilities The MNE from Emerging/Developing Economies (DMNE) The Largest Developing Country MNEs Obstacles Facing MNEs from Developing Economies DMNE Advantage in Global Markets Typical Features of DMNEs COUNTRY BOX Asian MNEs in China The Small and Medium-Size International Enterprise (SMIE) What is an SMIE? Obstacles to SMIE Internationalization SMIE Advantages in Internationalization SMIE Internationalization Features INDUSTRY BOX Investment Banking and the SMIE Born International PART TWO Endowments and Environments of International Business CHAPTER 5 - Country Competitiveness OPENING CASE Singapore's Competitive Advantage in the Hard Disk Drive Industry Defining Country Competitiveness Country Competitiveness and MNEs Country-Level Determinants Science, Education, and Innovation Macroeconomic Soundness Finance Internationalization Industry-Level Determinants INDUSTRY BOX E-Commerce as an Element of Country Competitiveness Firm-Level Determinants Individual-Level Determinants COUNTRY BOX Italy: Can Berlusconi Renew the Nation? Government Role CHAPTER 6 - The Cultural Environment OPENING CASE The Goodyear-Sumitomo Alliance What Is Culture? Culture and International Business Culture Does Not Explain Everything Correlates of Culture Language Religion National Culture Classifications Hofstede's Dimensions of Culture COUNTRY BOX Korea-Power Distance in the Cockpit Schwartz's Classification Trompenaars and Hampden-Turner's Classification Other Dimensions of Culture National Culture Clustering Corporate Culture Classifications of Corporate Culture Other Layers of Culture Key Cultural Issues Cultural Etiquette Cultural Stereotypes Cultural Distance Convergence and Divergence INDUSTRY BOX Cultural Industries CHAPTER 7 - The Political and Legal Environment OPENING CASE Burger King Israel The Political Environment The Institutional Context The MNE-Government Relationship The MNE Relationship with the Host Government The MNE and its Home Government Coalition Building and Influence Tactics INDUSTRY BOX EU Retaliation Against U.S. Steel Tariffs Political Risk The Measurement of Political Risk Regional-Level Politics Micro-Region Political Processes The Legal Environment The Institutional Context COUNTRY BOX Indonesia: Manufacturers Life in Indonesia Legal Jurisdiction Regional Jurisdiction National Jurisdiction Legal Issues of Interest to the MNE Rule of Origin Laws Competition Laws Marketing and Distribution Laws Product Liability Laws Treaties Patent Laws PART THREE Global Markets and Institutions CHAPTER 8 - International Economic Integration and Institutions OPENING CASE M's Response to European Market Integration International Economic Integration Global-Level Cooperation Among Nations The World Trade Organization (WTO) COUNTRY BOX China: China Joins the WTO The International Monetary Fund (IMF) The World Bank Group Other International Economic Organizations Regional-Level Cooperation Among Nations Postwar Regional Integration North America: The North American Free Trade Agreement (NAFTA) Europe: The European Union (EU) Asia Pacific Latin America Africa and the Middle East Regionalization vs. Globalization Commodity-Level Cooperation Among Nations Organization of Petroleum Exporting Countries (OPEC) The Multifiber Arrangement (MFA) Strategic Responses of MNEs INDUSTRY BOX Siemens Sharpens its Focus to Respond to the Single Market CHAPTER 9 - The International Monetary System and Financial Markets OPENING CASE The Mexican Crisis During and History of the International Monetary System The Gold Standard Period (-) The Inter-War Years and World War II (-) The Bretton Woods System (-) The Post-Bretton Woods System (-Present) Contemporary Exchange Rate Systems Fixed-Rate System Crawling Peg System COUNTRY BOX Hong Kong: Can the Hong Kong Dollar Retain the Fixed Peg to the U.S. Dollar? Target-Zone Arrangement Managed Float System Independent Float System Advantages and Disadvantages of the Floating System Determination of Foreign Exchange Rates Purchasing Power Parity (PPP) Interest Rate Parity (IRP) Implications for MNEs: Foreign Exchange Forecasting The Balance of Payments Current Account Capital Account Official Reserves Account International Foreign Exchange Market Landscape of the International Foreign Exchange Market Market Participants and Functions Foreign Exchange Rate Quotations Transaction Forms Foreign Exchange Arbitrage Black Market and Parallel Market International Capital Markets International Money Markets International Bond Markets INDUSTRY BOX Foreign Companies Borrow in Cheap U.S. Bond Market International Stock Markets International Loan Markets The Asian Financial Crisis The Financial Perspective The Political/Institutional Perspective The Managerial Perspective PART FOUR International Business Strategies CHAPTER 10 - International Entry Strategies OPENING CASE DuPont's Entry Strategies into China International Location Selection (Where) Locational Determinants COUNTRY BOX Federal Express Selects Subic Bay Decision Framework Timing of Entry (When) Early-Mover Advantages Early-Mover Disadvantages Decision Framework Entry Mode Selection (How) Entry Mode Choices Trade-Related Entry Modes Transfer-Related Entry Modes FDI-Related Entry Modes Decision Framework Greenfield Investment, Acquisition, and Merger The Evolutionary Entry Path INDUSTRY BOX Unilever's Acquisitions in Latin America CHAPTER 11 - Organizing and Structuring Global Operations OPENING CASE Aetna International Strategy and Organization Design Global Integration and Local Responsiveness MNE Strategy and Design Subsidiary Roles and Imperatives MNE Organizational Structures The National Subsidiary Structure The International Division Structure The Global Functional Structure The Global Geographic Structure COUNTRY BOX Regional Headquarters in Asia: The EU Versus Asia The Global Product Structure INDUSTRY BOX Global Product Design at the Ford Motor Company The Global Matrix Structure The Mixed Structure Integrating Global Operations Tools for Global Integration The Transition Challenge The Role of Corporate Headquarters CHAPTER 12 - Building and Managing Global Strategic Alliances (GSAs) OPENING CASE Motorola and Siemens AG in Germany Defining Global Strategic Alliances Types of GSAs Rationales for Building GSAs Challenges Facing GSAs Building Global Strategic Alliances Selecting a Local Partner Negotiating Alliance Contracts Structuring Global Strategic Alliances COUNTRY BOX Spain: Fujitsu in Spain: Barriers to Alliance Management Managing Global Strategic Alliances Managing Inter-Partner Learning Exercising Managerial Control Heightening Cooperation Thinking Ahead of Exit INDUSTRY BOX Experience of Building GSAs in Corning and Emerson CHAPTER 13 - Managing Global Research and Development (R&D) OPENING CASE Managing Global R&D at Nestle Why Globalize R&D? Benefits and Challenges of Global R&D COUNTRY BOX India: R&D Centers of Global Companies in India Designing and Structuring Global R&D Type of Foreign R&D Units Selecting R&D Location INDUSTRY BOX Ford Locates its R&D Center in Aachen, Germany Structuring Global R&D Activities Managing and Operating Global R&D Human Resource Management Autonomy Setting Global Planning Communication Improvement Technology Transfer Across Borders PART FIVE Functional IB Areas CHAPTER 14 - Financial Management for Global Operations OPENING CASE Minimizing Exposure in RTZ Why Learn Financial Management? International Trade Finance International Trade Payment Export Financing Financing for Global Business Intercompany Financing Equity Financing Debt Financing Local Currency Financing Financing Decisions Managing Foreign Exchange Risk and Exposure Foreign Exchange Risk and Exposure Transaction and Economic Exposures Managing Transaction Exposure Managing Economic (Operating) Exposure INDUSTRY BOX Netting in Philips Global Coordination of Exposure Management COUNTRY BOX Latin America: Eight Hedging Techniques in Latin America Working Capital Management Cash Management Foreign Receivable Management CHAPTER 15 - International Accounting for Global Operations OPENING CASE Compaq Won the Case Country Differences in Accounting Why Accounting Systems Differ Among Countries INDUSTRY BOX Accounting Diversity in Volvo National Accounting Zones International Accounting Harmonization International Accounting Standards COUNTRY BOX Australia: Accounting in Australia Foreign Currency Translation Commonly Used Translation Methods Harmonization of Translation Methods International Accounting Information Systems Transfer Pricing and Taxation Strategies Why Transfer Pricing? Transfer Pricing Techniques Transfer Pricing Regulations and Penalties Tax Havens, Treaties, and Strategies Tax Havens Tax Treaties Other Tax Strategies for MNEs CHAPTER 16 - Global Marketing and Supply Chain OPENING CASE Domino's Pizza The International Marketing Challenge Assessing Market Potential Globalization and Localization in International Markets Globalization Forces Localization Forces Product Adaptation COUNTRY BOX The Kimchi Doctors Country-of-Origin Effect Branding Channel Decisions Promotion Marketing Alliances The Global Supply Chain The Globalization of Supply Chains Global Sourcing Customizing the Supply Chain Packaging Transportation Modes INDUSTRY BOX Global Logistics at Wal-Mart Crossing National Borders CHAPTER 17 - Global Human Resource Management OPENING CASE BP Amoco Strategic IHRM Staffing the MNE The Globalization of Boards of Directors INDUSTRY BOX The Globalization of the Board of Directors in Different Industries COUNTRY BOX The Globalization of Boards Across the Globe Staffing the MNE Ranks Country-Specific Issues The Expatriate Workforce Types and Distribution of Expatriates Using Expatriates: Pros and Cons Expatriate Failure Expatriate Selection Preparing for Foreign Assignment Compensation Culture and Compensation Repatriation HRM in International Affiliates Human Resource Problems in Foreign Affiliates Preparing for an Assignment in a Foreign Affiliate PART SIX Emerging Issues in International Business CHAPTER 18 - Global Internet and E-Commerce OPENING CASE Otis Elevator Internet and E-Commerce Diffusion Comparative Internet Demographics E-Commerce around the Globe COUNTRY BOX Nepal: The Internet in Nepal E-Readiness Connectivity Information Security E-Business Climate National E-Readiness Cross-Border E-Commerce The Impact of E-Commerce on International Business Global E-Commerce Challenges Standardization Forces Localization Challenges Taxation Issues INDUSTRY BOX Taxing Digitized Products CHAPTER 19 - Ethics and Corruption in the Global Marketplace OPENING CASE Shell Group Ethics and Corruption in International Business Definition and Magnitude of Corruption The Origins of Corruption Drawbacks of Corruption Corruption Rankings Types of Corrupt Practices Smuggling Money Laundering Piracy and Counterfeiting INDUSTRY BOX Piracy in the Global Software Industry Bribe Paying The Foreign Corrupt Practices Act (FCPA) The Globalization of the Fight Against Corruption COUNTRY BOX China: Counterfeiting and Piracy in China CHAPTER 20 International Entrepreneurship OPENING CASE Japanese Entrepreneurs in Hawaii Defining International Entrepreneurship Comparative Entrepreneurship Culture and Entrepreneurship Funding New Ventures Cross-Border Entrepreneurship Internationalizing the Born Global Enterprise INDUSTRY AND COUNTRY BOXES Israeli Start-Ups in the Global Market Place Chapter Summary APPENDIX The OECD Guidelines for Multinational Enterprises Glossary Organization Index Name Index Subject Index

Author Biography

Oded Shenkar is Ford Motor Company Chair in Global Business Management and Professor of Management and Human Resources at the Fisher College of Business, the Ohio State University; and has taught in China, Japan, Israel and the UK. He holds B.A. and MSc.soc degrees in East Asian Studies and Sociology from the Hebrew University of Jerusalem, and M.Phil and PhD degrees from Columbia University. In addition to strategic alliances, his main areas of interest are cross-border investment and the impact of culture on international business. He has published numerous articles in the Academy of Management Review, the Academy of Management Journal, Human Relations, the Journal of International Business Studies, Management Science, Organization Science, Organization Studies and the Journal of Applied Psychology, among others, and is a member of the editorial board of the Academy of Management Executive, Human Relations, the International Journal of Cross-Cultural Management, the Journal of International Business Studies, Management International Review and Organization Studies. His prior books include Organization and Management in China 1979-1990 (M.E. Sharpe), International Business in China (Routledge, with L. Kelley), Global Perspectives on Human Resource Management (Prentice-Hall), The Handbook of International Management Research (Blackwell, 1st ed.; University of Michigan Press, 2nd ed., with B.J. Punnett), International Business (Wiley, with Y. Luo) and The Chinese Century (Wharton Publishing). Professor Shenkar serves as an advisor to multinational firms, government and international agencies. He is a Fellow of the Academy of International Business and a member of the Conference Board Council of Integration Executives.