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International economics--multinationalization of the firm,outsourcing and intra industry trade on factor price equalization - Essay Example

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The essay will cover a brief literature review on all four concepts and then a discussion will be carried out to explain the impact.
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International economics--multinationalization of the firm,outsourcing and intra industry trade on factor price equalization

(Markusen and Venables) Over the years there has always been a conflict on defining these corporations in one way. One of the definitions declared Multinational enterprise as “An enterprise that engages in Foreign Direct Investment (FDI) and owns or controls value adding activities in more than one country”(Dunning and Lundan) The phenomenon of Globalization has affected the Multinationalization of firms a lot. Now that the products, services, and customers are not limited to one region, the companies are attracted to expand their operations globally in order to gain extra profits.
The term outsourcing is relatively new compared to other literature of economics. Few decades ago, organizations believed to do everything by themselves. It was all part of value chain. However in the late 80’s the concept of outsourcing came into the market. Which was to outsource one part of the business to a third party.(Quinn) this step was considered necessary either to save costs or to make the overall operations more efficient. It was also viewed as a tool which could help an organization focus on the core business. (Feenstra and Hanson) Basic concept of outsourcing is to make a contract with another organization or supplier to become part of the value chain by providing a product/service to make operations of the organizations more effective and efficient.
Intra industry trade is an interesting concept, which means trade of goods and service of a similar kind. In simple words it can be defined as exchange of similar products for import and export. The term is usually used in international trade and means when a country export and imports similar products and services at the same time. (Grubel and Lloyd) The concept is very interesting because according to scholars an explanation can’t be found for the idea. It is hard to say why countries export and import identical commodities. (Grimwade) Some researchers recommend that such trade is carried out ... Read More
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