Financial and Non-Financial Theories of International Diversification

Abstract

Alan Rugman was one of the first to examine in a systematic way the connection between the internationalization of the firm and the diversification of assets within the multinational enterprises (MNE). He has since moved on to deal with many other issues surrounding the MNE, but his major contribution to the subject of international diversification (Rugman, 1979) was for many years essential reading for anyone with serious pretensions to be or to become an international business scholar. Rugman (2005) himself sees the key idea in his early book as being an appreciation of the role of risk in foreign direct investment (FDI). MNEs in the place of individual investors, diversified their portfolio of assets, and thereby served as a vehicle for risk reduction. This argument can be applied especially before 1970, before advances in financial markets and international asset instruments enabled individual investors (or funds acting on their behalf) to directly conduct for themselves such strategies of international diversification to reduce risk.

Citation

Cantwell, J. (2005), "Financial and Non-Financial Theories of International Diversification", Verbeke, A. (Ed.) Internalization, International Diversification and the Multinational Enterprise: Essays in Honor of Alan M. Rugman (Research in Global Strategic Management, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 59-73. https://doi.org/10.1016/S1064-4857(05)11005-5