International Business: Elective
Instructor: Murali Patibandla
Indian Institute of Management, Bangalore
The Objective:
The purpose of this course is to build a framework of analysis that enables managers to
understand challenges of international investment and to assess the opportunities they
represent. The course will introduce students to the broad perspectives of developing
economies in terms of issues of globalization, market institutional environment, and
government policy and business environment followed by detailed and specific issues
regarding multinational business policy implications. Major part of the content of the
course will be issue based and a few case studies will be for tool based managerial
decision-making.
The conceptual readings and the case studies will be taught and
discussed in the class to enhance the understanding the macro level issues of
globalization and market institutional environment for their implication for business
policy of MNCs with country, industry and firm level case studies
The Reading Material:
Most of the reading material is based on academic articles and case studies. The
instructor will provide the collection of the reading material to the students a week before
the course starts. There are a few papers, which are listed as further readings, which may
not be discussed in the class given the time constraint. However, students are advised to
read them and use them for their project writing.
Method of Teaching:
Each Session will have two components: In the first part, the instructor will discuss
conceptual and theoretical issues of the topic. In the following part will introduce the case
followed by the case discussion by students. The instructor and students will bring out the
summary and business policy implications in the end together.
Examination
There are two components to the final evaluation of the grades. One is the group project,
which carries 50 percent of the credit, and the other 50 is for a final written exam. The
instructor will evaluate the project and the group will present the project to the class (20
minutes). The projects that are original in content will fetch higher grades. Each student
should be able to defend the whole project in the class presentation.
Every student must attend a minimum of 16 classes. If a student misses a class she/he
loses 6 marks. The reason for a missing a class must be in accordance with the PGP
office rules.
The Project:
Teamwork is encouraged both for the class presentations and the project. The project
should be a team -based project with five members for each team. The team should not
exceed five members. The project could be a country; industry and firm focused project
and should be backed by well-defined concepts and frameworks. The analysis and
conclusions of the project should bring out multinational business policy implications.
The instructor will give a few ideas for the project.
Some Ideas for the project
1. Competitive Dynamics between local firms and MNCs in an Emerging economy.
The case of India’s Automobile Industry- Bajaj and Hero Honda; Mahindra and Mahindra, Tata,
Hyndai, Ford. Maruti
The convergence and divergence in strategies of local firms and MNCs
2. Prospects of Bio technology industry and Multinational Investment
3. Prospects of Pharmaceutical Industry and Multinational Investment
4. Multinational Investment in Service industry in India and emerging issues; outsourcing- the costs and
benefits to MNCs and local economy. The future evolution of MNC investment in technology and up
gradation and their determinants
5. Determinants of MNCs investment in developing economies; country case studies- China, India, East
Asia etc
6. Issue of joint ventures between local firms and MNCs in India and other emerging economies (case of
Bharati Airtel IBM and Ericsston)
7. Outsourcing in the manufacturing- the case of auto components
8. Globalization of R&D Investment
9. Knowledge Management in Multinationals in IT industry, Biotech and Pharmaceutical industry
10. Cross border mergers and acquisitions
11. Indian firms investing abroad, acquisitions and Greenfield ventures: cross border international
management issues
12. Emergence of technology intensive industries from emerging economies (examples of Pharma,
Software, auto-components etc)
13. Emerging Economy Multinationals
The Contents of the course:
1. Globalization : Challenges and Opportunities for MNCs
Dimensions of globalization, a brief history, the good and bad of globalization
East Asian financial crisis, the US financial crisis of 2008, the Euro zone crisis
The Readings:
Keith Griffin, Economic globalization and institutions of global governnace
Levitt, Theodore, 1983, The Globalization of Markets, Harvard Business Review
The Case Study:
Morgan Stanley in Emerging Markets, Global Gamble, Business Week, Feb 12 1996, pp.63-72
Patibandla, M and R.Prusti, 1998, The East Asian Crisis as a Result of Institutional Failures: Lessons
for India, Economic and Political Weekly, February 28-March 6, 469-472.
2. Trade theory- Comparative advantage and New trade theories
Theory of comparative advantage and new theories of international trade
Readings, Krugman and Obstfeld,
Patibandla, M., New Theories of International Trade: A Survey of Literature, Indian Economic Journal,
1994.
3.Theory of Multinational Investment
This session will undertake a brief discussion of the theories of multinational firms to identify factors
determining FDI in general.
The Readings:
Markusen, J.R. 1995, The Boundaries of Multinational Enterprises and the Theory of International Trade,
Journal of Economic Perspectives, Vol. 9 (2).
Krugman and Obstfeld,
4. Determinant of FDI in Emerging Economies
This session will analyze what are additional economic and institutional factors that are germane to analyze
determinants of FDI into developing economies. Followed by a discussion of managerial decision of
undertaking FDI in different industries. In the end, students should understand the factors that are important
in making foreign direct investment in emerging economies.
Patibandla, M, 2007, The Pattern of Foreign Direct Investment into Developing Economies, International
Journal of Management and Decision Making
Huang, Hard versus Soft infrastructure
5. Organization of Transnational Corporations
Reading: Bartlet and Ghoshal, What is a Global Manager, HBR
6. Market Institutions and Developing Economies: Implications for Entry and
Ownership
The previous section discusses market institutions as one of the main determinants of FDI in developing
Economies. This session will discuss the issue of market institutions in more detail- the issues of property
rights, transaction costs and policy commitments and their implications on FDI in developing economies. The
students will be encouraged to explore how institutional factors have implications on investment, entry mode in
term of joint ventures and fully owned subsidiaries.
The Readings:
Henisz, J.W and O.E. Williamson, 1999, `Comparative Economic Organization- Within and Between
Countries, Business and Politics, 1 (3): 261-276.
Patibandla Murali 2013, New Institutional Economics: Its Relevance to Curbing Corruption, Economic
And Political Weekly
The Case:
White Nights and Polar Lights: Investing in the Russian Oil Industry (HBS 0-795-022
7. Global Mergers and Acquisitions
With a Focus of Indian companies acquisitions abroad
Readings: Seth et all SMJ
8. International trade, investment and development of financial markets in
emerging economies
This session will discuss the issues relating how financial markets develop in emerging economies in
response to opening up to international trade and capital in emerging economies. The session will trace out
the financial development in Europe and the US historically and the possible lessons for emerging
economies and their implication on multinational business.
Readings:
Raghuram Rajan and Luigi Zingales, 2002, Financial systems, industrial structure, and growth
Raghuram Rajan and Luigi Zingales, 2002, The great reversals: the politics of financial development in the
20th Century
9.Knowledge Management in Multinational Firms
Multinationals, especially in skill and knowledge intensive industries, have to transfer knowledge across
different subsidiaries around the world. Knowledge transfer requires dealing with codified and tacit
elements of knowledge. This session discusses knowledge management issues in MNCs.
Readings:
Designing Knowledge Management Systems in MNCs. Nielsen and Michailova
Towards a Phase Model of Global Management Systems
10. Global outsourcing and emerging economies
Large multinational firms undertake vertical foreign direct investment and outsourcing for taking
advantage of global division of labor. This session will discuss the trade-off factors between undertaking
outsourcing and foreign direct investment for utilizing low cost skilled and unskilled labor in developing
economies. It discusses the conceptual issues of production outsourcing in terms of defining value-chains
and explaining differences in value-chains and the governance issue of managing international outsourcing.
Readings:
Sturgeon, T.J., 2000, How do we define value-chains and production networks!’ MIT, Globalization
Working Papers.
Aron, R and J. Singh, 2002, IT Enabled Strategic Outsourcing Knowledge Intensive Firms, Information
Work and the Extended Organizational Form, The Wharton School.
11.Multinational firms and joint ventures in emerging economies
This section discusses the issues relating to costs and benefits of getting into joint ventures with local firms
in general and in the context of developing economies. The discussion brings out the factors, managers
should take into account in assessing costs and benefits of establishing joint ventures and fully owned
subsidiaries in developing economies and how joint ventures can be seen as an entry mode strategy into
developing economies characterized by underdeveloped market institutional conditions.
Paul Beamish and Napa, Managing Joint Ventures
Patibandla M, Dynamics of Joint Ventures, Jindal Journal of Business Research
Anderson, A and H. Gatignon, 1986, Modes of Foreign Entry: A Transaction Cost Analysis and
Propositions, The Journal of International Business Studies.
12. Location, technological spillovers of MNCs
This session discusses the driving forces behind the globalization of technological activities of
multinationals and under what conditions this will benefit developing economies through technological
spillovers. The discussion would lead to understanding what factors go into location of technological
activities in developing economies and under what conditions both MNCs and local economies mutually
benefit from it.
Readings:
Leamer, E.M and M. Storper, 2001, The Economic Geography of the Internet Age, NBER
Metiu, A and Bruce Kogut, 2001, Distributed Knowledge and the Global Organization of Software
Development, The Wharton School
The Case Presentation by Students:
Patibandla, M and B. Petersen, 2002, Role of MNCs in the Evolution of High- Technology Industries in
Developing Economies: The Case of India’s Software Industry, World Development, 30 (9), 1561-1577.
13. Globalization of R&D and MNCs locational decisions
There has been increasing globalization of R&D investment. Developing economies are generally observed
to be deficient of necessary conditions for R&D investment. However there are few instances in which
MNCs undertake R&D investment in Developing countries. This session will analyze the determinants of
R&D investment and its implications for FDI.
Readings:
Organizing global R&D: challenges and dilemmas Maximilian von Zedtwitza,*, Oliver Gassmannb, Roman
Boutellierb,c
Cantwell, J and O Jamne, 1999, Technological Globalization and Innovation Centers: The Role of Corporate
Technological Leadership and Locational Hierarchy’ Research Policy, 28, 119-144. Le Bas C and C.Sierra,
2002, Location versus home country advantages in R&D activities: some further results on multinationals
locational strategies, Research Policy,2002
14. Emerging Economy Multinationals and Competing in Emerging Economies
In a few developing economies, there are well-established local firms with location specific brands and
distribution networks, which present a strong competitive dynamics to MNCs. Local firms, and
multinational companies may have relative advantages in different spheres. This session discusses how to
identify these relative advantages (disadvantages) and formulate competitive strategy in the emerging
economies.
Readings:
Asia’s New Competitive Game
Fist two Chapters of Emerging Markets Rule
Patibandla Murali: Implications of FDI in India’s Retail Sector
15. Competition: Convergence and Divergence of MNCs and Local Firms
When MNCs and local firms compete in emerging economies there will be forces of divergence and
convergence in business strategies of firms. This session will conceptually analyze the economic factors
deriving divergence and convergence.
Readings:
Patibandla, M, 2013 , Convergence and Divergence
The Case Presentation:
Kelon: China’s Corporate Dragons, HBS no. 701-053
16. Internationalization and Corporate Governance
There has been increasing gloabalization of capital markets and also need for adopting more transparent
corporate governance practices. This session will discuss the issue of foreign financial institutions and there
effect on corporate governance and also local firms expansion into international markets and adoption of
international standards of corporate governance.
Readings:
Patibandla, M, Equity pattern, corporate governance and performance Journal of Economic Behvior and
Organization
Khanna and Palepu, Internationalization, Corporate governance: the case of Infosys
17. Future of Globalization
Video: Jeffrey Sachs
Project Presentations