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Is Competitive Advantage a Necessary Condition for the Emergence of the Multinational Enterprise?

The paper challenges the view that competitive advantage is a necessary condition for the emergence of the multinational enterprise. It formally derives the conditions under which multinational enterprises may emerge without possessing a competitive advantage vis-a-vis their rivals. This counter-intuitive argument is based on three insights: (1) the ability of a larger number of disadvantaged home-country entrepreneurs to enroll workers in the host country more efficiently than a smaller number of advantaged host country entrepreneurs; (2) asymmetric liability of foreignness for home- and host-country entrepreneurs; and (3) the ability of location and internalization advantages to substitute for ownership advantage.