Journal of International Business Studies

, Volume 41, Issue 4, pp 567–586 | Cite as

An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment

  • John Cantwell
  • John H Dunning
  • Sarianna M LundanEmail author


This paper examines the co-evolution of MNE activities and institutions external and internal to the firm. We develop a theoretical framework for this analysis that draws on the more recent writings of Douglass North on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness, and of Richard Nelson on the co-evolution of technology and institutions. We link historical changes in the character of MNE activities to changes in the institutional environment, and highlight the scope for firm-level creativity and institutional entrepreneurship that may lead to co-evolution with the environment. We argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of MNE subsidiaries. Thus MNE agency derives from more decentralized forms of experimentation in international corporate networks, which competence-creating nodes of new initiatives can co-evolve with local institutions. Unlike most other streams of related literature, our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms. This form of co-evolutionary analysis is increasingly important to understanding the interrelationships between MNE activities and public policy.


theory of FDI and the MNE institutional theory evolutionary economics historical adaptation 



The origins of this paper lie in a conversation between John Cantwell and John Dunning in April 2007, in which we agreed to collaborate on a paper on an evolutionary theory of international business activity in a longer-term historical perspective. In October that same year Sarianna Lundan joined the conversation, and we decided that we needed to focus as our central theme on the co-evolution of MNE activity and the institutional environment. The three of us worked closely together on the paper, despite the diagnosis of John Dunning's illness in January 2008. John continued to be involved in all our discussions of the paper through to the sad event of his death in January 2009, which was during the second round stage of revision and resubmission. Thereafter, the two remaining authors completed the final version of this paper, and we take full responsibility for the form in which it finally appears. We are grateful for the helpful comments that we have received from the reviewers and participants at the AIB conference in San Diego, to the three anonymous referees of the journal, and to the editors of JIBS.


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Copyright information

© Academy of International Business 2009

Authors and Affiliations

  • John Cantwell
    • 1
  • John H Dunning
    • 2
  • Sarianna M Lundan
    • 3
    Email author
  1. 1.Department of Management & Global BusinessRutgers Business SchoolRutgers University, NewarkUSA
  2. 2.Department of EconomicsUniversity of ReadingReadingUK
  3. 3.Department of Organization and StrategySchool of Business and Economics, Maastricht UniversityMaastrichtThe Netherlands

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