Bringing financial economics into international business research: taking advantage of a paradigm change
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GUEST EDITORIAL
Bringing financial economics into international business research: taking advantage of a paradigm change Tamir Agmon 1
College of Management, Rishon Lezion, Israel and School of Business, Economics, and Law, Gothenburg University, Sweden Correspondence: Tamir Agmon, Graduate School of Business, the College of Management, Rishon Lezion, Israel Tel: +972 3 963 4013 E-mail: [email protected]
Journal of International Business Studies (2006) 37, 575–577. doi:10.1057/palgrave. jibs.8400222
In a Letter from the Editor in the March 2004 issue of JIBS, Arie Lewin the Editor-in-Chief of the Journal discussed the big questions of international business research. In his discussion Professor Lewin says that: ‘yit is also important to recognize that new theories, new paradigms or new empirical approaches emerge from the way in which we structure the market for ideas in our multidisciplinary field.’ Later in the editorial Lewin adds that: ‘ythe field of IB is poised to cross the threshold to break-out from long-established orthodoxies and that the IB community of scholars will be experiencing a period of intellectual ferment of new ideas and exchanges with scholars in the social sciences with interest in globalization’. Recent changes in financial economics provide an opportunity for scholars in IB to bring finance into the center stage of research in international business. Such a development has two important dimensions; first it will close the gap between the central role of finance in the practice of international business and the minor role, (some say no role), of financial economics in the research of international business. Second it will break out of the longestablished orthodoxy of the economics of international business as expressed primarily by the eclectic approach and the OLI model that focused on the assets’ side of the corporation, and will focus the attention on capital flows, financial intermediaries, and changes in the liabilities’ side of corporations as an additional source and an expression of international business. In this brief editorial, I discuss three related issues pertaining to finance in international business and to the interface between financial economics and research in international business. The first issue is why there is a gap between the role of finance in the practice of international business and international business research in finance? The second issue is how recent developments and a major paradigm change in financial economics provide scholars in international business with an opportunity to bring financial research into international business. The third and the last issue is looking at the current development of private equity and venture capital activities in peripheral countries (emerging markets) as a financial form of foreign direct investment (FFDI). The economics of international business began in the US in the early 1960s where economists like George Stigler, Robert C
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