Editing Internationalization (section)

== Further theories ==

=== Contingency theory ===
{{Main|Contingency theory}}
Contingency theory refers to any of a number of management theories. Several contingency approaches were developed concurrently in the late 1960s. They suggested that previous theories such as [[Max Weber|Weber]]'s [[bureaucracy]] and [[Frederick Winslow Taylor]]'s [[scientific management]] had failed because they neglected that management style and organizational structure were influenced by various aspects of the environment: the contingency factors. There could not be "one best way" for leadership or organization.

=== Contract theory ===
{{Main|Contract theory}}
In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of [[asymmetric information]]. Contract theory is closely connected to the field of [[law and economics]]. One prominent field of application is managerial compensation.

=== Economy of scale ===
{{Main|Economy of scale}}
[[Economies of scale]], in [[microeconomics]], are the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as output rises.<ref name="o'sullivan02">{{cite book |last1 = O'Sullivan |first1 = Arthur |author-link =Arthur O'Sullivan (economist) |first2=Steven M. |last2=Sheffrin |title = Economics: Principles in Action |url = https://archive.org/details/economicsprincip00osul |url-access = limited |publisher = Pearson Prentice Hall |year = 2003 |location = Upper Saddle River, New Jersey 07458 |page = [https://archive.org/details/economicsprincip00osul/page/n173 157] |isbn = 0-13-063085-3}}</ref> [[Diseconomies of scale]] are the opposite. Economies of scale may be utilized by any size firm expanding its scale of operation.

=== Internalisation theory <small>''(Peter J. Buckley & Mark Casson, 1976; Rugman, 1981)''</small> ===
{{Main|Internalization theory}}

=== Product life-cycle theory  ===
{{Main|Product life-cycle theory}}
As first articulated by [[Raymond Vernon]] in 1966, a product goes through a [[product life cycle|life cycle]] consisting of four stages: "new product", "growth product", "maturity product" and "obsolescence product". The conditions in which a product is sold change over time and must be managed as it moves through this succession of stages. This is called [[product life cycle management]]. <ref name="vernon">{{cite journal |title= International Investment and International Trade in the Product Cycle. in: Quarterly Journal of Economics. |last= Vernon |first= Raymond |journal= Quarterly Journal of Economics |year= 1966 |publisher= Cambridge |issn= 0033-5533 |page= 191 |url= http://dispatch.opac.d-nb.de/DB=1.1/CMD?ACT=SRCHA&IKT=8&TRM=0033-5533 }}{{Dead link|date=November 2018 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

=== Transaction cost theory ===
{{Main|Theory of the firm|Transaction cost}}
The theory of the firm consists of a number of [[economic theory|economic theories]] which describe the nature of the firm, company, or corporation, including its existence, its behaviour, and its relationship with the market.

[[Ronald Coase]] set out his transaction cost theory of the firm in 1937, making it one of the first ([[neo-classical economics|neo-classical]]) attempts to define the firm theoretically in relation to the market.<ref name="Coase">Coase, Ronald H., "The Nature of the Firm", ''Economica'' 4, pp 386–405, 1937.</ref> Coase sets out to define a firm in a manner which is both realistic and compatible with the idea of substitution at the margin, so instruments of conventional economic analysis apply. He notes that a firm’s interactions with the market may not be under its control (for instance because of sales taxes), but its internal allocation of resources are: “Within a firm, ... market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur ... who directs production.”  He asks why alternative methods of production (such as the [[Supply and demand|price mechanism]] and [[economic interventionism|economic planning]]), could not either achieve all production, so that either firms use internal prices for all their production, or one big firm runs the entire economy. <!-- [[see john erdman, 2006]] --> More recent work has added managerial cognition into the transaction cost theory framework to internationalization—for example, a 2025 study of Chinese SMEs found that top managers’ global mindset significantly influences their choice of export channel in conjunction with TCE considerations.<ref>{{cite journal |last1=Brouthers |first1=Keith D. |last2=Nakos |first2=George |last3=Lindlbauer |first3=Niklas |last4=Kalinić |first4=Igor |year=2025 |title=Export Channel Choice for SMEs: A Cognitive Perspective |journal=Thunderbird International Business Review |doi=10.1002/tie.22436 |url=https://onlinelibrary.wiley.com/doi/full/10.1002/tie.22436 |url-access=subscription }}</ref>

=== Theory of the growth of the firm <small>''(Edith Penrose, 1959)''</small> ===
{{Main|Edith Penrose#The Theory of the Growth of the Firm|label1=Theory of the growth of the firm|Edith Penrose}}
While at Johns Hopkins, Penrose participated in a research project on the growth of firms. She came to the conclusion that the existing theory of the firm was inadequate to explain how firms grow. Her insight was to realise that the 'Firm' in theory is not the same thing as 'flesh and blood' organizations that businessmen call firms. This insight eventually led to the publication of her second book, ''The Theory of the Growth of the Firm'' in 1959.