– The purpose of this paper is to show that the market-internalization framework can be applied to non-economic institutions because society’s non-market sub-systems – political, social and cultural – are subject to failures just like economic markets, and firms can contribute to their repair or replacement by selectively, strategically and responsibly internalizing the market and non-market arenas for these sub-systems’ functions.
– Internalization theory is applied to a new area – that of societal failures.
– Internalization theory can be applied to the joint failures of economic and non-economic institutions, and this helps explain the growing “political role” of multinational enterprises in economies in transition as well as the phenomenon of increasing multinational firm activity in underdeveloped economies.
– The limits and implications of internalization are drawn in terms of theory development, legitimacy and managerial strategies.
– This paper is the first to analyze the selective internalization of societal failures by the multinational enterprises. It extends internalization theory and examines the contested notion of “public goods”.
