Theories of the multinational firm: A microfoundational perspective

Research Summary We analyze the six core international business (IB) strategy frameworks highlighted by Forsgren (2013) to identify the explicit or implicit microfoundations embedded therein. We start from two, broad microfoundations, namely bounded rationality and bounded reliability, covering a total of ten microfoundational facets, recently put forward as supposedly essential to any predictive and managerially relevant theory of the firm (Kano and Verbeke, 2015). We show how these various facets, embedded in the conceptual foundations underlying the various theoretical approaches, can be made actionable by articulating them explicitly and by connecting them to firm‐level IB strategy outcomes. We also describe how reflecting on these microfoundational facets and on the likely actionable implications thereof for managerial decision making, allows enhancing these theories’ conceptual power, predictive capacity, and managerial relevance. Managerial Summary We analyze the six main theories of the multinational enterprise (MNE), as described in Mats Forsgren's (2013) classic book, Theories of the Multinational Firm. We assess whether individual‐level assumptions about managerial behavior and decision‐making are present in the logic of the theories. We find that each theory builds upon specific micro‐level assumptions, but these assumptions are typically neither articulated, nor linked to MNE strategy decisions, e.g., in the realm of geographic footprint, operating mode selection, interaction with the external environment, internal organization etc. We show how assumptions about human behavior implied in IB theories can be made actionable by spelling these out and connecting them to international strategic choices by MNEs. We also describe how reflecting on micro‐level assumptions can enhance actionable managerial implications of IB theory.