Multinational firms are said to be important agents of change and of what Schumpeter portrayed, Craetive Destruction. Hymer’s original intention was to answer the question: How is it that a national firm can start an operation in a foreign country? Internalization theory tries to answer a somewhat different question: Why is this question carried out by the firm itself, and not sold to a local firm through the issue, for instance, a licence? Discuss with examples.
The response to the latter question requires an elaboration of what a firm is entirely about and why it is natural to internalize activities within a firm. Hymer 's contribution has in effect predated most current extant theory. His contribution to the political economy of multinational capital, the focus here, is less known, yet of extraordinary insight and foresight. Hymer predates most important debates on what today is called ‘globalization’ and came upward with an analysis of the most eminent quality and predictions which in the main have stood the test of time.
According to Hymer, he said that there are two things that should be consider about why an enterprise in one state should assume control over a society situated in foreign nations. Which is, foreign investment consists a strategic move in an oligopolistic market and secondly direct investment can allow the firm to build the profitable employment of any strategic advantage in factor price, production efficiency, distribution system or product