ABSTRACT
International business can be defined as all trade and investment activities between nations, both public and private (Eden et al. 2011; Boddewyn 1997). As summarised by Boddewyn (1997), international business is ‘negotiated trade and investment that join nations and cross state barriers, as performed by both public and private firms operating and interacting at various levels; personal, organisational, product, project, functional, network, industry, global’. The objectives of international business revolve around asset seeking, market expansion, acquiring additional resources and greater efficiency. Since foreign countries can serve as sources of both production and sales, international business has a major interest in the nature of relationships between countries, especially those that can impact commercially. Regional integration is a process that states enter into in order to enhance cooperation with other states. Regional integration can be described as territorial systems that increase the interactions between their components in creating new forms of organisations (De Lombaerde and Van Langenhove 2005). Regional integration has manifested itself through history in many forms and is ‘a product of many and varied forces’ (Mattli 1999). Trade and economic integration can be the most common outcomes of today’s regional integration. Hill (2011) defines regional economic integration as agreements amongst countries in a geographical region to reduce/remove both tariff and nontariff barriers allowing free flow of goods, services and factors of productions. The benefits of regional integration can be substantial and often occur as a direct result of increasing trade or allowing for the increased flow of factors of production. However other benefits such as political stability, institution building and more efficient allocation of resources also exist. Rosamond (2000) argues that there are a number of explanations when considering the relationship between political and economic processes in shaping change. For example, it might be the case that changes in the informal economic domain such as heightened capital mobility, increased
trade, changes in production and the resultant developing corporate strategies all oblige governments to form ties in an effort to control the economic processes. Here, regional integration is a consequence of international business. However an alternative view would invert this explanation, suggesting that these changes are facilitated by increased political cooperation and the ‘deliberate sanction of government authority’. This school of thought articulates the role of state cooperation and integration in allowing elements of international business such as international trade to occur (Rosamond 2000). Indeed, international business and regional integration have also been described as mutually reinforcing in nature (Vaitos 1982). The interplay of regional integration with international business is essentially the issue being addressed by Rosamond. Has regional integration been created and driven by a desire for political sanction or has it developed out of economic considerations and international business? This question encapsulates the ‘chicken and the egg dilemma’: what comes first, international business or regional integration? The issue of terminology arises here and in particular, the distinction between regionalism and regionalisation (Breslin et al. 2002). Essentially, regionalism refers to state-led projects, which are characterised by the emergence of intergovernmental dialogue and treaties (Breslin et al. 2002). Regionalisation refers to the processes of integration that come from the market, from private trade and investment flows, and from the policies and decisions of companies, rather than from the predetermined plans of national or local government (Breslin et al. 2002). Similarly, regionalisation has been characterised as market driven integration spurred by regional growth dynamics, the emergence of international production networks and related flows of FDI (UNCTAD 2007: 53). The contention that international business is a fundamental driver of regional integration is supported by Polanyi’s (1957) hypothesis, that globalisation can be understood as a ‘second great transformation’ of a ‘double movement’ – where an expression of market expansion is followed by ‘a political intervention in defence of societal cohesion’ (Hettne 2005: 548). Here, the first globalising movement concerns the expansion of the market and the second, regional movement, constitutes the societal response. Conceptualised in this way we can see how globalist business strategies can often result in more regionalised patterns of economic activity (Ruigork and van Tulder 1995; Rugman and Verbeke 2004). According to Johnson and Turner (2010), international business and MNEs have intensified international regional integration as the depth of cross-border corporate linkages and greater density of network interconnectedness have grown. The 1980s saw a shift in the focus of regional integration, with international business and globalisation playing an increasing role. Soderbaum and Sbragia (2010) consider that, whereas the old regionalism in the
1950s and 1960s was dominated by the bipolar Cold War structure with nation states as the primary actors, regionalism since the end of the 1980s should be related to the ongoing transformation of the world, especially globalisation. This new wave of regionalism has come to be known as ‘new regionalism’, which is increasingly economic-focused with transnational corporations and their international operations playing an intensified role as non-state actors (Best and Christiansen 2008). In a similar vein, Kinichi Ohmae (1985) argues that corporations, not nations, are driving economic activity and that their influence, presence and powers transcend traditional geographic boundaries.
