Management literature has developed several theories that focus on the activities of business firms in foreign markets. The International School is an important part of this literature. This school of thought tries to explain the phenomenon of internationalization of production and trade (e.g., Hennart, 2001). The most important questions this school asks are: Why are firms leaving their home countries and going into foreign markets? What are the different strategies that firms use to enter a new foreign market? What factors influence the decision of when and where to enter? What parts of the corporate value chain will be outsourced across firm or national boundaries?
At this point there is no encompassing theory that integrates all these questions. As a result there are different ways to explain economic activities in foreign markets. The historical point of origin for such explanations is the theory of external trade. This theory enumerates the advantages stemming from exchange of goods across national boundaries under conditions of imperfect mobility of factors of production. By contrast, theories of international production analyze the conditions that encourage the transfer of capital and factors of production into foreign countries. The article presents in the following an overview of this school of thought.