Abstract/Summary

International Business (IB) is an inherently complex subject because of its global context, the importance of innovation, and the range of ownership and location factors that need to be examined. Here it is argued that IB theory can learn from economics, but that it should not emulate economics too closely because economics makes restrictive assumptions that assume away important issues in IB. We argue that better IB theory can be created by extending existing theories rather than by starting again with new kinds of theory. However, existing theories need to be formulated in a more explicit manner in order to increase their predictive power. More attention needs to be given to the role of the entrepreneur and the headquarters function. More emphasis also needs to be placed on the industry rather than the firm, so that competition and co-operation between firms can be better understood. The approach is pragmatic and constructive. It not only sets out how IB theory can be extended, but explains exactly how it can be done.