Toward an 'International Business' Paradigm of Endogenous Growth: Multinationals and Governments as Co-Endogenisers

Endogenous growth theory has recently originated in economics. Building on this theory, this paper conceptualises the phenomenon of endogenous growth in terms of some new ideas developed in the field of international business (IB), especially Dunning's eclectic paradigm and his notion of macro-organisation policy. These ideas have so far not been linked to the notion of endogenous growth. At the same time, mainstream economics has not made much progress in exploring the MNC-government relationships through which growth-inducing 'mechanics' are created, a topic of great importance in IB. Both MNCs and governments complement each other in facilitating an efficient matching of ownership-specific assets (notably knowledge) with location-specific advantages through Dunning's OLI mechanism, thereby enabling the developing host countries to realise potential growth in an intensified manner, a new mode of endogenous growth that counteracts the law of diminishing returns. The phenomenon of MNC-cum-governmentdriven endogenous growth will be conceptualised.