Bringing History into International Business

We argue that the field of International Business should evolve its rhetoric from the relatively uncontroversial idea that “history matters” to exploring how it matters. There are three conceptual reasons for doing so. First, historical variation is at least as good as contemporary cross-sectional variation in illuminating conceptual issues. As an example, we show that conclusions reached by the literature on contemporary emerging market business groups are remarkably similar to independently reached conclusions about a very similar organizational form that was ubiquitous in the age of empire. Second, history can allow us to move beyond the oft-recognized importance of issues of pathdependence to explore the roots of Penrosian resources. Third, there are certain issues that are un-addressable, except in the really long (that is, historical) run. Exploring the causal relationship (if any) between foreign direct investment, a staple of the International Business literature, and long-run economic development provides one important example. International Business scholars often talk about history, but rarely take it seriously. Or so it would seem from reading the pages of JIBS. A simple search showed that the word “history” was mentioned in 119 articles and notes published in the journal since 1990. The word “evolution” occurred in 135 articles and notes. Yet not a single article was explicitly devoted either to the history of IB or employed historical data to explore an issue. Only a handful of articles contained longitudinal data covering more than a decade. This was not always the case. The first generation of IB scholars placed a high priority on evolutionary and historical perspectives and methodology. Among the pioneers of the discipline, Raymond Vernon’s product cycle model employed an evolutionary approach to explain the wave of U.S. manufacturing investment in post-war Europe (Vernon, 1966). Subsequently Vernon undertook a vast research project at the Harvard Business School to establish the historical origins of the largest U.S. multinationals. This remains the largest longitudinal source of data on the evolution of historical firms (Vaupel and Curhan,1969,1974; Curhan, Davidson and Suri, 1977). Vernon was not alone. Dunning’s first major book, which examined U.S. multinational investment in Britain, published in 1958, traced the evolution of those firms back to the nineteenth century. Many of the key concepts of the OLI paradigm were first developed in that book, as the result of empirical research and historical observation, before being formally stated in later work (Dunning 1958, 2001). Subsequently, Dunning made major contributions to understanding the historical origins of international business. In 1983 he published the first – and to date only – set of estimates of the size of world FDI in 1914 and 1938, long before any official statistics had been collected. Prior to that date, it had been assumed that most nineteenth century capital movements were portfolio in nature. Dunning suggested that upwards of one third of the huge amount of world foreign investment before 1914 was FDI. If this order of magnitude is correct, this probably represented a similar share of world output to that seen in the 1990s (Dunning 1983; United Nations 1994). This research, conducted nearly two decades before the “first globalization” of the world economy before 1914 became a fashionable research area for economic historians and others (O’Rourke and Williamson, 1999) has been largely neglected by international business researchers, although it was