Book review: Mark Casson,The Theory of International Business: Economic Models and Methods

Though ostensibly modest in page number, this perspective from Professor Casson provides the reader with a depth and richness of content that feels more voluminous than the physical stature of the text itself would suggest. The central theme which runs throughout the book is that of a return to the roots of developing international business research by way of theoretical development through modelling.

While not formally delineated, the book can be conceptually separated into three general segments. The first section (Chapters 1–4) presents the primary motivation of the author in approaching the text and introduces some economic topics relevant to international business. As the book’s title suggests, the premise of the text is that international business as a research field was born within the realm of economics and has since shifted to being seen through the lens of the management discipline and the field may be well served if the pendulum swung back towards its original standpoint.

The author provides a review of economics generally and its role in the field of international business that is both thorough yet manageable to digest, particularly if the reader has some background knowledge. After making the case for the use of models for their virtue of bolstering intellectual rigour, the book walks the reader through economic modelling in its simplest form to its more complex arrangements in an incremental manner.

The author prudently describes an assortment of topics in relation to their use in economics and in international business while presenting the concepts in their model form. This section moves from utility of labour, to monopolistic competition and finally location; this last point is where some deviation may occur depending on the reader and their prior experience in studying international business. Those with some background knowledge will likely find themselves quite comfortable with the trade concepts of location advantage and comparative advantage, while those with less familiarity may take a more deliberative approach to navigating Chapter 4.

While the first section included topics in an introductory form, according to their chapter titles, the second section (Chapters 5–8) continues with the previously established chapter structure and ever-increasing complexity of the subjects, and consequently rising intricacy of the associated models. At this point, the author covers the familiar issues of division of labour and modularization, ownership, contracts and firm rivalry. Each of these concepts expand in complexity as they proceed in a single country scenario, though as one extrapolates these activities out into a cross-border condition then an almost exponential effect can apply itself to the involvedness of the model.

The third section (Chapters 9–11) starts by addressing spreading models in order to deal with some catalysts for complexity, namely tariffs, taxes and economies of scale. Next, the typically management focussed issue of handling the firm is examined from an economic viewpoint with additional emphasis on the sophistication that arises with multinational firms. Lastly, the text concludes with its brief final chapter advocating for an increase in the implementation of economic modelling into future international business research.

A primary value this book provides to future research is not in terms of, ‘what next’ but rather, ‘how to next’ and why economic methods are useful. It does not highlight gaps in the literature that can be investigated, and which could then stimulate further development of potential knowledge areas. What makes this book unique is its focus instead on the gap of the approach to how research is undertaken in the IB field. While Casson argues that the Resource-Based View and a strategic management approach to international business research fall short to an economic approach, he does not dismiss them outright. Much of the growth areas of IB research have blossomed out in these non-economic realms but Casson warns that just because branches of the literature are expanding in those directions, it does not necessarily mean that the studies are as rigorous as ones that are based on a modelling view. The essence of this text is a call for corrective action for the sake of academic precision and thoroughness.

This book would likely benefit several constituencies. Students studying and conducting research studies in the field of international business would be well served to read this book as a way to establish an economic way of thinking about the topics they study and the subjects they may approach with their own research questions prior to developing a research agenda. Current academics would also benefit from a review of this text as a way to reframe the assessment of their research endeavours with a renewed focus on economic models and the theoretical underpinnings that support those models.