The Reading School of International Business is a school of economic thought widely understood in the field of international business (IB), management and economics to embody a stream of conceptual, and theoretically driven empirical research related to enterprises. It consists of a group of economists that have a common approach to analyzing multinational enterprise and foreign direct investment. Some are based in the Department of Economics and in Henley Business School at the University of Reading, England, but membership is international. The Reading School builds upon the pathbreaking theoretical work of Peter Buckley and Mark Casson on internalization theory. This was complemented by simultaneous work by John Dunning as he developed the eclectic paradigm of international business as an envelope explanation containing three principal drivers of foreign direct investment, comprising ownership (O); location (L); and internalization (I). The Reading School approach continues through the work of its academic disciples around the world, as well as through The John Dunning Centre at Henley Business School, University of Reading, under the directorship of Rajneesh Narula.
History and Growth The term ‘Reading School’ was first identified in 1978 by the Japanese economist Kiyoshi Kojima (1920–2010), when he criticized the explanation of the post-war growth of multinational enterprises made by scholars at the University of Reading. Kojima argued that Western multinationals were monopolies that distorted the international allocation of resources rather than improved it. The Reading School, by contrast, emphasized the efficiency gains that multinational enterprises can generate in a world of imperfect markets. They argued that multinationals shared technologies between parent firms and subsidiaries, and between one subsidiary and another, thereby transferring technologies to countries that did not have the resources to develop them themselves. The Reading School accepts that high-technology firms may possess a degree of monopoly power, but it argues, following Joseph Schumpeter, that monopoly profits can reward innovation. The Reading School approach argues that under certain conditions it is best for society to allow multinationals to decide for themselves whether to retain control of their technologies through foreign investment or to partner with local firms instead. Internalization theory and the eclectic paradigm have been refined over the last 40 years to become the bedrock explanations of multinational enterprise activity. The founder members of the Reading School were John Harry Dunning (1926–2009), Peter Buckley, Mark Casson, Robert Pearce and John Cantwell. Dunning was Head of the Department of Economics at the University of Reading, 1964-87 (later Professor at Rutgers University, New Jersey), Buckley was Research Fellow at University of Reading in 1973-4 (later Professor at University of Bradford and University of Leeds), Casson was lecturer in economics (later Professor and Head of Department) at University of Reading, Pearce was Research Fellow (later Professor) at University of Reading and Cantwell was Research Fellow (later Professor) at University of Reading and then Rutgers University. Buckley and Casson promoted internalization theory, whilst the others promoted Dunning's eclectic paradigm. Cantwell later espoused an evolutionary resource-based view of multinationals, while simultaneously also contributing to the eclectic paradigm. Aside from scholars based at University of Reading, visiting scholars in the 1970s and 1980s were instrumental in debating and refining the Reading School approach. Canadian economist Alan M. Rugman (1945–2014) visited in 1976/77 on sabbatical, and in subsequent years, Rugman became an influential exponent of the Reading School approach, extending internalization theory to address policy issues in business taxation and trade regulation. He returned to University of Reading in 2008 and was Head of International Business and Strategy in Henley Business School. Other notable visitors were Seev Hirsch, founding member of the Leon Recanati Graduate School of Business Administration at Tel Aviv University; Stephen Magee (University of Texas at Austin); David Teece, visiting in 1989, now at University of California, Berkeley; Thomas G. Parry, visiting in 1975; and Masahiko Itaki in the late 1980s. In 1988 the business historian Geoffrey Jones (academic) joined the economics department, and Reading School thinking began to influence business and economic history (Jones left in 2002 and is now Professor of Business History at Harvard Business School). Sarianna Lundan, a Ph.D. student of John Dunning at Rutgers University, joined University of Reading in the late 1990s before moving on to Maastricht University and then University of Bremen. Lundan, along with Dunning late in his career, continued to extend the Reading School approach to multinational enterprise.
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