D. C. Hague, J. H. Dunning; Costs in Alternative Locations: The Radio Industry, The Review of Economic Studies, Volume 22, Issue 3, 1 January 1954, Pages 2

The great contribution of Stephen Hymer's seminal dissertation (1960) was to escape from the intellectual straightjacket of neoclassical-type trade and financial theory, and move us towards an analysis of the multinational enterprise (MNE) based upon industrial organization theory. The magnitude of this breakthrough can be put into perspective by considering the state of the art when Hymer wrote twenty-five years ago. In 1960 the prevailing explanation of international capital movements relied exclusively upon a neoclassical financial theory of portfolio flows. In this frictionless world of perfect competition, with no transaction costs, capital moves in response to changes in interest rate (or profit) differentials (see Carl Iversen, 1936). According to this arbitrage theory, capital is assumed to be transacted between independent buyers and sellers, that is, there is no role for the MNE. At the time there was no separate theory of foreign direct investment (FDI). The work did not even ask the question, of Why is there FDI?, despite the evidence of sectoral cross investments and the existence of large MNEs with intra-industry trade. If anything, the early work on FDI focused upon the where of investment in a particular nation or industry, for example, Dunning (1958) was chiefly interested in explaining U.S. FDI in Britain. There was little interest in understanding the reasons for the MNE, or the nature of its operations. The pioneering conceptual insight of Hymer was to break out of the arid mold of international trade and investment theory and focus attention upon the MNE per se. This permits us to treat FDI as a modality by which firms extend their territorial horizons abroad. The unique feature of FDI is a mechanism by which the MNE maintains control over productive activities outside its national boundaries, that is, FDI means international production. In this view, FDI is more than a process by which assets or claims are exchanged internationally (see Robert Aliber, 1970; 1983). Hymer's great insight was in focusing attention upon the MNE as the institution for international production, rather than international exchange. Until Hymer articulated the process of FDI as an international extension of industrial organization theory, it was not possible to understand why the MNE transfers intermediate products such as knowledge or technology among its units across different nations while still retaining property rights over such assets. Today it is widely recognized that the theory of FDI (i.e., international production) is primarily about the transfer of nonfinancial and ownershipspecific intangible assets by the MNE, which needs to appropriate and control the rate of use of its internalized advantage(s), see Rugman (1981), David Teece (1981; 1982), Richard Caves (1982) and Mark Casson (1983). In this paper we first acknowledge Hymer's contribution to the theory of FDI and then move on to reinterpret his dissertation in the light of the modern theory of the MNE. We tDiscussants: Raymond Vernon, Harvard University; Robert Z. Aliber, University of Chicago; Paul Streeten, Boston University.

This classic work, first published in 1958, is a seminal text in international business history. This new, substantially updated and revised edition is being published on the fortieth anniversary of the first edition. Features of the revised edition include: * a new introduction * a new concluding chapter * amendments and additions to the original text * a new statistical appendix which examines the main features and significance of the US penetration of UK industry over the past four decades. Professor Dunning is one of the most internationally renowned and respected scholars in international business research. The updated version of this highly regarded book is a major contribution to studies in international business history.

We examine the wealth effects of the announcement of issues of different types of convertible securities by UK firms and find significant negative effects on shareholder wealth. We however, also find that when the sample is partitioned by method of issue, privately placed convertible bonds, in contrast to previous research, exhibit a negative impact on firm wealth. Further, we also find negative wealth effects for firms that issue convertible securities to refinance previous debt or finance specific acquisitions. However announcements of convertible bond issues, for the purpose of financing capital expenditure schemes, show significant positive wealth effects. Finally, we find mixed support for testable predictions of the main theoretical models relating cross-sectional firm characteristics of convertible bond issuers to abnormal returns.