1. ¹Centre for International Business, Leeds University Business School, UK
2. ²Jerusalem School of Business Administration, The Hebrew University, Israel

Correspondence: PJ Buckley, Centre for International Business, Leeds University Business School, Maurice Keyworth Building, Leeds LS2 9JT, UK. Tel: +44 (0)113 233 4646; Fax: +44 (0)113 233 4754; E-mail: pjb@lubs.leeds.ac.uk

Received 26 February 2007; Revised 3 July 2007; Accepted 30 July 2007; Published online 10 July 2008.

Abstract

The paper presents a simple general equilibrium model that formalizes internationalization in the eclectic paradigm based on a reconfiguration of concepts taken from the new classical economics literature. The model enables us to address simultaneously the role of ownership, location and internalization advantages, and their interaction, in the emergence of the multinational enterprise (MNE) through a set of mathematical inequalities. Our model offers a bridge between the detached perceptions of the MNE often held by international trade economists and international business scholars, and makes specific aspects of the eclectic paradigm empirically testable.