ABSTRACT
This chapter focuses on flexibility with the more traditional research Agenda which predominates in the literature reviewed by Caves. It identifies a new research agenda for modelling multinational enterprises (MNEs) which is not fully reflected in Caves' work. Flexibility is the ability to reallocate resources quickly and smoothly in response to change. Following a brief review of economic methodology, the chapter examines the factors underlying the end of the "golden age". Flexible firms need to locate in flexible regions of nation states with flexible economic policies. In this way the forces of flexibility are continuously restructuring the world economy. During the "golden age" of Western economic growth, trade was liberalised through GATT and through customs unions, such as the European Economic Community (EEC) and EFTA. US mass production technology was transferred through the internal markets of MNEs. The "golden age" terminated suddenly with the oil price shock of 1973.
