Introduction

 International business refers to the performance of trade and investment activities by firms across national borders. Since the most conspicuous aspect of international business is the crossing of national boundaries, we also refer to international business as cross-border business. Firms organize, source, manufacture, market, and conduct other value-adding activities on an international scale. They seek foreign customers and engage in collaborative relationships with foreign business partners. While international business is primarily carried out by individual firms, governments and international agencies also engage in international business transactions.1 Firms and nations exchange many physical and intellectual assets including products, services, capital, technology, know-how, and labor. In this book, we are concerned primarily with the international business activities of the individual firm. 

While international business has been around for centuries, it has gained much speed and complexity over the past two decades. Firms seek international market opportunities more today than ever before, touching the lives of billions of people around the world. Daily chores such as shopping and leisure activities such as listening to music, watching a movie, or surfing the Internet involve international business transactions that connect you to the global economy. International business gives you access to products and services from around the world and profoundly affects your quality of life and economic well-being. The growth of international business activity coincides with the broader phenomenon of globalization of markets. The globalization of markets refers to the ongoing economic integration and growing interdependency of countries worldwide. While internationalization of the firm refers to the tendency of companies to systematically increase the international dimension of their business activities, globalization refers to a macrotrend of intense economic interconnectedness between countries. In essence, globalization leads to compression of time and space. It allows many firms to internationalize and has substantially increased the volume and variety of cross-border transactions in goods, services, and capital flows. It has also led to more rapid and widespread diffusion of products, technology, and knowledge worldwide, regardless of origin.

In practical terms, the globalization of markets is evident in several related trends. First is the unprecedented growth of international trade. In 1960, crossborder trade was modest—about $100 billion per year. Today, it accounts for a substantial proportion of the world economy, amounting to some $10 trillion annually—that is, $10,000,000,000,000! Second, trade between nations is accompanied by substantial flows of capital, technology, and knowledge. Third is the development of highly sophisticated global financial systems and mechanisms that facilitate the cross-border flow of products, money, technology, and knowledge. Fourth, globalization has brought about a greater degree of collaboration among nations through multilateral regulatory agencies such as the World Trade Organization (WTO) and the International Monetary Fund (IMF). 

Globalization both compels and facilitates companies to pursue cross-border business activities and international expansion. Simultaneously, going international for a firm has become easier than ever before. A few decades ago, international business was largely the domain of large, multinational companies. Recent developments have created a more level playing field that allows firms of any size to benefit from active participation in international business. In this text, you will read about the international activities of smaller firms, along with those of large multinational enterprises. In addition, where cross-border business was once mainly undertaken by manufacturing firms, this is no longer the case. Companies in the services sector are also internationalizing, in such industries as banking, transportation, engineering, design, advertising, and retailing.