InternationaltopicsEcono.docx

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Editor
Stefan Schneider
+49 69 910-31790
[email protected]
Technical Assistant
Pia Johnson
+49 69 910-31777
[email protected]

Deutsche Bank Research
Frankfurt am Main
Germany
Internet: www.dbresearch.com
E-mail: [email protected]
Fax: +49 69 910-31877
Managing Director
Norbert Walter
October 1, 2004 Current Issues
The U.S. balance of payments: wide-
spread misconceptions and exaggerated
worries
• The U.S. balance of payments is by far the most confusing and
least
understood area of the U.S. economy. The confusion is centered
around the
large and rapidly growing deficits. Indeed, the deficit on the
current account of
the balance of payments rose to new records, both in absolute
and relative
terms.
• These developments created worries and fears regarding the
sustainability of
the external deficits. However, closer examination of the issue
shows that the
worries and fears are exaggerated and, most importantly, there
are no short-
and medium-term solutions because of a number of structural
reasons.
Mieczyslaw Karczmar, +1 212 586-3397 ([email protected])

Economic Adviser to DB Research
Guest authors express their own opinions, which may not
necessarily be those of Deutsche Bank
Research.
Economics 3
The U.S. balance of payments is by far the most confusing and
least
understood area of the U.S. economy. The confusion is centered
around the large and rapidly growing deficits. Indeed, the
deficit on
the current account of the balance of payments rose from USD
474
billion in 2002 to USD 531 billion in 2003 and is estimated to
reach
over USD 600 billion in 2004 (see table 1). In relative terms,
the
deficits amount to 4.5%, 4.9% and 5.3% of GDP, respectively,
in
those years. Both in absolute and relative terms, these are all-
time
records.
The sustainability of external deficits
Persistent and rising external deficits have attracted increasing
at-
tention of politicians, economists and the media. Needless to
say,

the deficits are generally viewed as highly negative for the U.S.
economy and U.S. financial conditions. The main points of
concern
are:
• Rising foreign indebtedness that might create financial
difficulties
over time.
• A potential massive dollar depreciation needed to rectify the
situation.
• In an extreme case, a financial crisis as foreigners refuse to fi-
nance U.S. deficits and switch their capital to other places.
The media, regardless of their political outlook, have been
commenting on the U.S. external deficits for quite some time,
spreading fear and predicting all sorts of calamities, which
apparently sells newspapers well. About five years ago, in the
fall of
1999, The New York Times ran an article with a pointed
headline:
“The United States sets a record for living beyond its means;”
and a
Barron’s article talked about a current account crisis and a
ticking
time bomb.
Had these scary predictions materialized, the U.S would have
been
bankrupt by now. But never mind, the fascination with the
rising
deficits continues. A Financial Times article a few weeks ago
was
headlined: “America is now on the comfortable path to ruin.”
The persistence of external deficits and their presumable
negative
effects have focused the economic debate on the key question.

Are
the deficits sustainable? A generally uniform answer is that not,
that
they are not sustainable. The Federal Reserve chairman Alan
Greenspan has repeatedly emphasized that he does not believe
the
deficits can go on indefinitely. But he confessed that he does
not
know when will they stop. And he admitted that so far the
financial
markets have coped very well with the global payments
imbalances.
The late Herbert Stein, a great economist with a great sense of
hu-
mor, had famously said that if something cannot go on forever,
it will
stop. The logic of this reasoning is unassailable. However, 2004
will
be the 29th consecutive year of trade deficits and (disregarding
the
statistical aberration in 1991 when foreign contributions to
finance
the Gulf war produced a small surplus) the 23rd consecutive
year of
current-account deficits. But during this period, the U.S.
enjoyed a
generally prosperous economy, especially during the decade of
the
1990s when the economy went through an unprecedented boom.
So maybe Stein’s saying should be reversed – if a trend goes on
for
a long time, and it not only does not have any harmful effects
but, on
the contrary, coincides with a period of prosperity, it may well
be
sustainable.

One-liners aside, there is an apparent conflict between theory
and
empirical evidence. To address the contradiction between
theoretical
and empirical considerations, it is necessary to examine the
Scary media predictions have so far
not materialised
-6.0
-5.5
-5.0
-4.5
-4.0
-3.5
-3.0
2000 2001 2002 2003 2004
-700
-600
-500
-400
-300
-200

-100
0
Current account
USD bn
(right)
% GDP (left)
-600
-500
-400
-300
-200
-100
0
100
70 75 80 85 90 95 00
Current account &
trade balance
Current account
USD bn
Trade balance

Current Issues October 1, 2004
4 Economics
following key aspects of the U.S. balance of payments: a) the
nature
and underlying causes of the deficits, b) the financing of the
deficits,
c) main characteristics of U.S. foreign debt, and d) the role of
the
dollar in dealing with the external deficits.
Main characteristics of U.S. external deficits
When analyzing the external deficits, it is essential to
distinguish
between cyclical and structural deficits. The cyclical deficits
are
non-controversial and easy to understand. They result from the
disparity in economic growth between the U.S. and its main
trading
partners, with the U.S. showing stronger growth. This generates
increased demand for imports while U.S. exports are hampered
by
slower growth abroad.
Over the past 20 years, the U.S. has shown generally strong
eco-
nomic performance (except for two brief and shallow recessions
in
1991 and 2001), superior to most other industrial countries. It
is,
therefore, not surprising that this coincided with rising trade
and
current-account deficits. Indeed, while in 1983 the current-

account
deficit amounted to 1.1% of GDP, it has risen to about 5% in
the last
two years.
How long this strongly rising deficit trend would last? It is
difficult to
predict with any certainty. Yet, although the trend has been
cyclically
driven, it has certain permanent characteristics rooted in demo-
graphic and productivity aspects.
First, the U.S. is the only major industrial country with growing
popu-
lation. The latest census in 2000 has shown that during the
decade
of the 1990s U.S. population grew by 13.2%, in contrast with
stag-
nating or shrinking populations elsewhere in the industrial
world.
Moreover, although the U.S. population is aging, it is aging less
than
in other main industrial countries – the census revealed, e.g.,
that
72.7% of U.S. population was below the age of 50, while the
number
of people in the 35-54 age range, the most productive and
highest
spending segment, increased by 32% in the previous decade.
Second, the technological revolution of the 1990s was most
pronounced in the U.S. as it was in America where the
Schumpeterian “creative destruction” took mostly place. This
led to
strong productivity gains, superior to those in most other
nations.
The combination of population and productivity growth resulted
in a
rising growth potential of the economy. Even allowing for the

most
recent slowdown in productivity growth, potential annual
growth of
the U.S. economy is still estimated at about 3.5%, i.e. about 1%
higher than in Europe.
To be sure, there has been an acceleration of the economic
expan-
sion in Japan (even allowing for the most recent slowdown) and
continuing strong growth in China and the Asian newly
industrialized
countries (NIC). This should boost U.S. exports and possibly
arrest
the inexorable widening of U.S. deficits. But eliminating them,
let
alone turning them around into surpluses, is out of the question
in
the foreseeable future. The reasons lie in the structural deficits.
The structural deficits draw much less attention than the
cyclical
ones, even though they are at least equally important. Even if
the
disparity in economic growth rates between the U.S. and the
rest of
the world were eliminated, the U.S. would still have trade and
current-account deficits for the following main reasons.
First, U.S. income elasticity of imports is higher than foreign
income
elasticity for U.S. exports. This phenomenon is rooted in the
general
openness of the U.S. market, which makes imported goods
readily
available and it makes them available at increasingly
competitive
U.S. has exceptionally high income
elasticity of imports

-600
-500
-400
-300
-200
-100
0
100
70 75 80 85 90 95 00
-4
-2
0
2
4
6
8
Current account & real GDP
Current account
(right)

USD bn
Real GDP
(left)
% yoy
-4
-2
0
2
4
6
8
10
90 92 94 96 98 00 02 04
Nonfarm productivity
% yoy
Economics 5

prices. Moreover, the development of industrial cooperation and
outsourcing has increased sharply income elasticity of imports,
as
some products or groups of products are no longer produced in
the
U.S. While traditionally the ratio of import growth to GDP
growth was
about 1.7, it is now closer to 2.5 –3.0.
Second, the proliferation of outsourcing, beginning with the
North
American Free Trade Agreement (NAFTA) 10 years ago, and
now
extended to India, China and other Asian countries, has almost
by
definition widened the U.S. trade deficit as US products shipped
abroad return to the US with value added; hence, the value of
im-
ports exceeds that of exports.
Third, the U.S. dollar’s function as the main reserve currency
makes
the current-account deficit inevitable because of (a) inflow to
the
U.S. of monetary reserves of foreign central banks due to the
normal
accumulation of these reserves, especially in countries with
current-
account surpluses, and (b) occasional interventions in foreign
ex-
change markets by countries trying to resist the appreciation of
their
currencies vis-à-vis the U.S. dollar.
Of course, this source of financing the U.S. current-account
deficits
is not guaranteed forever. It is hoped that eventually the euro
will
also become a main reserve currency, which would in fact fulfill

de
Gaulle’s idea of breaking the dollar’s hegemony that was at the
foundation of the concept of a single European currency. But
this is
not likely to happen in the near future. The dollar is still the
dominant
reserve currency as about 65% of global monetary reserves are
held
in dollars.
The financing of U.S. external deficits
It is an axiom of the foreign trade theory that a country can run
a
balance of payments deficit only to the extent it can finance it,
either
through borrowing or through depleting its foreign exchange
reserves.
In this respect, the U.S. is in an exceptionally advantageous
situa-
tion because it does not need to borrow in a conventional sense.
The financing comes voluntarily because of the attractiveness of
the
U.S. as an investment destination providing generally higher
rates of
return than obtainable elsewhere; because of the seize, scope,
openness and liquidity of the U.S. capital markets; and because
of
the dollar’s role as the world’s prime investment, transaction
and
reserve currency. Interest rates are determined by the conditions
in
the U.S. money and capital market rather than dictated by the
lend-
ers. And, unlike most other countries, the U.S. has the ability to
fi-
nance its external deficits in its own currency.

There is no doubt that this relative easiness in financing is an
impor-
tant factor in sustaining the US trade and current-account
deficits.
Some economists go even further. They contend that it is the
financ-
ing side of the equation, or net capital inflow, that determines
the
current-account deficits. For example, Milton Friedman – in an
inter-
view earlier this year – when asked about the reason for the
U.S.
current-account deficit, responded that it is because foreigners
want
to invest in the U.S. This view was postulated by the Austrian
economist Böhm-Bawerk a good 100 years ago, stating that it is
the
capital account of the balance of payments which leads the
current
account.
This view is also represented by William Poole, president of the
Federal Reserve Bank of St. Louis. In a paper published in the
January/February 2004 issue of the Federal Reserve Bank of St.
Louis Review, Poole – drawing on research of Catherine Mann
from
the Institute for International Economics in Washington –
examines
2
4
6
8

10
12
14
16
80 82 84 86 88 90 92 94 96 98 00 02 04
10Y Govt. bond yields
%
USA
Germany
6 Economics
three different views of the U.S. international imbalance: (a) the
trade view, in which trade flows are the primary factors and the
offsetting capital inflows are secondary, (b) the GDP view, in
which
the current-account deficit is perceived as a shortfall between
domestic investments and domestic savings, and (c) the capital
flows view, in which the trade and current-account deficits are a
residual, the result of the capital-account surplus.
This surplus, in turn, is driven by foreign demand for U.S.
assets
rather than by any structural imbalance in the U.S. economy.
Needless to say, the capital flow view is the most amenable to
the

sustainability of the U.S. external deficits. There is a legitimate
concern voiced by some economists that – due to persistent
foreign
demand for U.S. assets – the U.S. has absorbed some 80% of
international savings in recent years. This may cause a U.S.
dollar
overweight in global portfolios. However, there is no solution in
sight
for this apparent asymmetry in portfolio allocations.
The financing of U.S. external deficits is an area of the greatest
mis-
conceptions. A popular view held by some economists and the
me-
dia is that foreign investors might refuse to finance the U.S.
deficits
and switch their capital to other places or invest in their own
coun-
tries, which could have dire consequences for the U.S.
This may indeed happen. But one should keep in mind that
foreigners invest in the U.S. because they view this as
advantageous for them, not to do America a favor. Granted, they
may decide to increase their domestic investments. But as long
as
the U.S. has a large current-account deficit and Japan, China
and
other countries have large surpluses, continuing capital inflow
to the
U.S. is assured.
It is also true that foreign countries may shift some of their
monetary
reserves to other places. But as long as the U.S. dollar remains
the
pre-eminent reserve currency, this is unlikely because of the
limited
size and scope of other monetary areas. The situation illustrates
the

“exorbitant privilege” – in de Gaulle’s words some 45 years ago
–
the U.S. derives from the dollar’s global role. This enables the
U.S.
to run “deficits without tears” as described by Jacques Rueff, de
Gaulle’s adviser.
In short, if someone argues that at some point foreigners might
re-
fuse to continue financing U.S. external deficits, a question
must be
answered – where would they go with their money. The
alternatives
to investing in the U.S. are very limited, indeed.
The U.S. international indebtedness
A very important issue in assessing the sustainability of the
U.S.
external deficits is the magnitude and structure of U.S. foreign
indebtedness, as reflected in annual Commerce Department
reports
on U.S. international investment position (see table 2).1
As can be seen, net indebtedness reached at the end of 2003
USD
2.4 trillion or USD 2.6 trillion (depending on the valuation
method of
U.S. and foreign direct investments), i.e. close to 25% of GDP,
up
from a rough equilibrium in 1989. This has caused widespread
lam-
entations that the U.S., the richest country in the world, has
become
within 15 years the biggest debtor in the world.
1 U.S. international investment position does not exactly

represent U.S. foreign debt,
since it also includes equities and physical capital, but it is a
good proxy of the U.S. in-
ternational indebtedness.
Current-account deficit can be
financed by a “structural surplus” in
the capital account
Lack of alternative locations for
investment
Economics 7
Such a sharp rise in foreign debt should not be surprising,
considering the piling up of current-account deficits in recent
years.
What is surprising, though, is that the investment
income/payments
balance has been in surplus (see table 1) despite the large and
rising debt. How to explain this apparent incongruity?
The main reason for the surplus in investment income despite
the
rising U.S. indebtedness is that U.S. investments abroad are, in
aggregate, more profitable than foreign investments in the
United
States.
This fact is primarily caused by a very large share of foreign
official
assets in the U.S. due to the dollar’s function as the main

reserve
currency. (Private capital flows, as mentioned before, have an
oppo-
site characteristic as foreigners generally enjoy a higher return
on
their investments in the U.S.)
As can be seen from table 2 (item 18), foreign official assets in
the
U.S. reached USD 1.5 trillion at the end of last year, i.e. 60% or
55%
of U.S. net indebtedness (depending on the valuation method of
direct investments). In allocating their monetary reserves,
foreign
central banks are primarily motivated by safety and liquidity
rather
than by the rate of return. They invest these reserves mostly in
U.S.
Treasury bills, which bring them relatively low returns.
In addition, U.S. currency owned by foreigners, which is
practically
costless, reached USD 318 billion last year (item 27), bringing
the
total of low- or no-cost U.S. liabilities to about 70% of net U.S.
debt.
Moreover, foreign official assets and currency have, by a large,
a
permanent character, similar to demand deposits at commercial
banks, further easing the burden of U.S. foreign indebtedness.
The balance of payments and the dollar
One of the most controversial issues of the U.S. international
economy is the relationship between the balance of payments
and
the dollar exchange rate. Many economists believe that it is the
widening of the U.S. current-account deficit that is responsible
for

the dollar decline during the past 2-3 years. Some even go
further
by saying that it would be impossible to eliminate the deficit
without
a massive, prolonged devaluation of the dollar.
These views are highly questionable. They ignore historic
experi-
ence and they are based on an obsolete theory. If the weakening
dollar is mainly the result of rising external deficits, how to
explain
the fact that between 1995 and 2001, when the U.S. current-
account
deficit nearly quadrupled, the dollar was on a strongly rising
trend.
Going back another 10 years to 1985, the Plaza Hotel
Agreement
was a major international event aimed at pushing the dollar
down,
with the main underlying objective of shrinking and eventually
eliminating the U.S. current-account deficit. This did not
happen,
however, and the deficit rose to new highs.
The main underlying reason for the weak response of trade
flows to
the dollar devaluation is the relative low price elasticity of both
sides
of the U.S. trade balance. On the import side, for the dollar
devalua-
tion to have a full effect on trade flows, two conditions must be
ful-
filled: a) foreign exporters have to raise their prices to offset
the cur-
rency loss, and b) domestic producers competing with imports
have
to keep their prices constant in order to increase their market
share

and shift demand away from imports to domestic production.
None of these conditions is fulfilled to the full extent. Foreign
exporters are reluctant to raise their dollar prices in order not to
jeopardize their competitive position in the huge and lucrative
American market. They often cut their profit margins and
sometimes
-25
-20
-15
-10
-5
0
5
10
15
76 81 86 91 96 01
Net international investment
position
% GDP
0.00
0.25

0.50
0.75
1.00
1.25
70 75 80 85 90 95 00
Balance of investment income
% GDP
-600
-500
-400
-300
-200
-100
0
100
80 84 88 92 96 00
70
80
90

100
110
120
130
140
Current account & USD
Current
account
(right)
USD bn
USD nominal
trade-weighted rate (left)
2000=100
8 Economics
even run temporary losses, all in order to keep their market
shares.
Labor Department data on import prices clearly show this
phenomenon. For the past two years non-oil import prices have
risen only marginally.
Moreover, even when foreign exporters raise their prices,

domestic
producers competing with imports often raise prices, too, under
the
umbrella of higher import prices, thus defeating the macro-
economic
purpose of devaluation. This had happened on a massive scale
in
the 1985-1995 period when U.S. auto makers did not bother to
go
for higher market shares; they raised their prices, knowing that
Americans will buy Japanese cars anyway because of their
superior
quality.
Interestingly, these are not new phenomena, they have been
known
for decades. Weak macro-economic effects of currency
devaluation
were particularly visible during the devaluation of the British
pound
in 1967. Since that time, if anything, devaluation effects have
be-
come weaker still as trade flows shifted further away from
commod-
ity-type trade toward capital equipment.
Similarly, on the export side, currency changes and the
associated
changes in relative prices have had diminishing results on the
trade
balance. This was especially clear during periods of the dollar
ap-
preciation in the 1980s and 1990s. It did not hamper U.S.
exports,
as theoretically expected. On the contrary, exports were running
strong since U.S. trade partners were willing to pay higher
prices for
the U.S. technology, know-how and sophisticated capital goods.

A separate case is the possible revaluation of the Chinese yuan
by
eliminating its fixed exchange rate to the dollar. This is
strongly ad-
vocated by some economists and policymakers in view of the
rapidly
rising U.S. trade deficits with China. But it is dubious that this
would
really happen. The exchange rate of the yuan is a political issue
rather than an economic one; it is determined by the Chinese
Polit-
bureau, not by market forces.
The dollar decline during the 2001-2004 period cannot be
attributed
to any large extent to the widening U.S. trade and current-
account
deficits. The main contributing factors were a) exceptionally
wide
interest ride differentials between the U.S. and other industrial
nations as U.S. rates fell to their lowest levels in over 40 years,
b)
the September 11 events and constant fears of further terrorist
attacks, and c) a change in the attitude of the U.S. toward the
dollar
as clear signs emerged that the Bush administration is not
unhappy
with the weaker dollar, in contrast with the strong-dollar policy
of the
second Clinton administration.
All together, a dollar devaluation is not likely to solve the
deficit prob-
lem (if there is one), and may disappoint those who advocate it.
On
the contrary, from the policy standpoint, it may have a negative
im-
pact on the U.S. economy. Considering that it is capital flows

rather
than trade flows that determine the dollar exchange rate,
devalua-
tion might hamper the financing of the deficit without reducing
it to
any large extent.
Concluding remarks
The persistence of U.S. external deficits and the associated rise
of
U.S. international debt have led to widespread worries and fears
as
to how long this condition may last and how could it be
rectified.
Closer examination of this issue shows, however, that the
worries
are far from justified and the fears greatly exaggerated, for the
fol-
lowing main reasons:
-30
-20
-10
0
10
20
30
40

80 82 84 86 88 90 92 94 96 98 00 02
Exports & USD
Exports
% yoy
USD nominal
effective exchange rate
-20
-15
-10
-5
0
5
10
15
90 92 94 96 98 00 02 04
Import prices & USD
Import prices % yoy
USD nominal
effective exchange rate

Economics 9
• The primary cause of U.S. trade deficits is disparity of
economic
growth, with the U.S. growing faster than most other industrial
nations due to demographic and productivity factors. Sure, a
deep and protracted recession in America could possibly reverse
the rising deficit trend. But, obviously, the cure would be worse
than the disease. The U.S. is thus a victim of its own success.
The deficit is a reflection of U.S. strength not weakness.
• Even when disregarding the growth disparity, the U.S. would
still
run external deficits for a number of structural reasons, the most
important of which are: a) high income elasticity of imports, b)
spreading industrial cooperation and outsourcing, c) the dollar’s
function as the key global reserve currency.
• Although the accumulation of current-account deficits raised
U.S.
international debt to about one-quarter of its GDP, the structure
of the debt is highly advantageous as about 70% of it constitutes
liabilities to foreign central banks and U.S. currency owned by
foreigners. Both sources have pretty permanent characteristics
and, above all, very low cost of financing or are outright
costless.
• The depreciation of the dollar is not likely to change much the
balance of payments deficit but it may jeopardize its financing.
So, all together, does the U.S. have a problem with its external
deficits? If it does, the problem certainly pales in comparison
with

major long-term problems, such as the unfunded liabilities of
the
Social Security system in view of the forthcoming retirement of
the
baby-boom generation, the explosive rise in health-care costs,
and
the growing dependence on oil imports from volatile areas of
the
world.
Most important, as the paper was trying to demonstrate, if it is a
problem, there are no immediate solutions of the problem. And
to
quote another Herb Stein’s one-liner, “if there is no solution to
a
problem, there is no problem.”
Finally, an important mitigating circumstance is that it is mostly
economists and politicians who worry about the external
deficits.
The general public does not lose sleep over the issue, which
only
attests to the common sense of the American people.
Mieczyslaw Karczmar, +1 212 586-3397 ([email protected])
Economic Adviser to DB Research
10 Economics
Table 1: U.S. Balance of Payments
(in billions of dollars)

I. Current Account 2002 2003 2004*
Exports of goods 681.8 713.1 791.5
Imports of goods -1164.7 -1260.7 -1400.2
Merchandise Trade Balance -482.9 -547.6 -608.7
Income from services 294.1 307.3 334.3
Payments for services -232.9 -256.3 -283.4
Services Balance 61.2 51.0 50.9
Income from U.S. assets abroad 266.8 294.4 340.8
Payments on foreign assets in the U.S. -259.6 -261.1 -311.2
Investment Income/Payments Balance 7.2 33.3 29.6
Unilateral Transfers -59.4 -67.4 -78.8
Current-Account Balance -473.9 -530.7 -607.0
II. Capital (Financial) Account (private)
Foreign direct investment 72.4 39.9 85.8
Foreign portfolio investment 385.9 365.4 503.4
Bank borrowing 96.4 75.6 343.5
Other 99.5 100.7 85.0
Capital inflow 654.2 581.6 1017.7
U.S. direct investment abroad -134.8 -173.8 -216.7
U.S. portfolio investment abroad 15.9 -72.3 -93.7
Bank lending -30.3 -10.4 -436.0
Other -46.4 -32.5 -108.8
Statistical discrepancy -95.0 -12.0 57.3
Capital outflow -290.6 -301.0 -797.9
Capital-Account Balance 363.6 280.6 219.8

III. Balance of Payments -110.3 -250.1 -387.2
IV. Official Reserve Transactions
Decline (+) /Increase (-) in U.S. official reserve assets -3.7
1.5 3.4
Increase in foreign official assets in the U.S. 114.0 248.6
383.8
*) Forecast
Source: US Department of Commerce, own calculation and
regroupings
Economics 11
Line Type of investment Position, Position
2002r 2003p
Net international investment position of the United States:
1 With direct investment positions at current cost (line 3 less
line
16)..........................................................................................
.....................................................-2,233,018 -2,430,682
2 With direct investment positions at market value (line 4 less
line
17)..........................................................................................
.....................................................-2,553,407 -2,650,990
U.S.-owned assets abroad:
3 With direct investment at current cost (lines
5+6+7)....................................................................................

...........................................................6,413,535 7,202,692
4 With direct investment at market value (lines
5+6+8)............................................................................ ........
...........................................................6,613,320 7,863,968
5 U.S. official reserve
assets......................................................................................
.........................................................158,602 183,577
6 U.S. Government assets, other than official reserve
assets......................................................................................
.........................................................85,309 84,772
U.S. private assets:
9+11+14+15)...........................................................................
....................................................................6,169,624
6,934,343
10+11+14+15).........................................................................
......................................................................6,369,409
7,595,619
Direct investment abroad:
9 At current
cost.........................................................................................
......................................................1,839,995 2,069,013
10 At market
value.......................................................................................
........................................................2,039,780 2,730,289
11 Foreign
securities................................................................................
...............................................................1,846,879 2,474,3 74

12
Bonds.....................................................................................
..........................................................501,762 502,130
13 Corporate
stocks.....................................................................................
..........................................................1,345,117 1,972,244
14 U.S. claims on unaffiliated foreigners reported by U.S.
nonbanking
concerns..................................................................................
.............................................................908,024 614,672
15 U.S. claims reported by U.S. banks, not included
elsewhere................................................................................
...............................................................1,574,726 1,776,284
Foreign-owned assets in the United States:
18+19)....................................................................................
...........................................................8,646,553 9,633,374
18+20)....................................................................................
...........................................................9,166,727 10,514,958
18 Foreign official assets in the United
States......................................................................................
.........................................................1,212,723 1,474,161
Other foreign assets:
21+23+24+27+28+29)..............................................................
.................................................................................7,433,83
0 8,159,213
22+23+24+27+28+29)..............................................................

.................................................................................7,954,00
4 9,040,797
Direct investment in the United States:
21 At current
cost.........................................................................................
......................................................1,505,171 1,553,955
22 At market
value.......................................................................................
........................................................2,025,345 2,435,539
23 U.S. Treasury
securities................................................................................
...............................................................457,670 542,542
24 U.S. securities other than U.S. Treasury
securities................................................................................
...............................................................2,786,647 3,391,050
25 Corporate and other
bonds......................................................................................
.........................................................1,600,414 1,852,971
26 Corporate
stocks.....................................................................................
..........................................................1,186,233 1,538,079
27 U.S.
currency..................................................................................
.............................................................301,268 317,908
28 U.S. liabilities to unaffiliated foreigners reported by U.S.
nonbanking
concerns..................................................................................
.............................................................864,632 466,543
29 U.S. liabilities reported by U.S. banks, not included
elsewhere................................................................................
...............................................................1,518,442 1,887,215
p Preliminary.

r Revised.
Source: US Department of Commerce, Bureau of Economic
Analysis
Table 2: International Investment Position of the United States
at Yearend, 2002 and 2003
[Millions of dollars]
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International Management Research:
Investigating Its Recent Diffusion
in Top Management Journals†
Niccolò Pisani*
IESE Business School, Avenida Pearson, 21, Barcelona, Spain
08034
The globalization of business and the related increase in amount
and relevance of international
research suggest the need to map the international management
field. Building on reviews by
Werner (2002) and Werner and Brouthers (2002), this study
provides a comprehensive picture
of the field by examining the amount and type of international
management research in 20 top
management journals from 2002 to 2006. An assessment of the
pervasiveness of international
management topics is also offered through a detailed analysis of
international management

publication patterns of 10 top management journals.
Keywords: international management review; top management
journals; publication patterns
In today’s increasingly competitive global marketplace,
international management (IM)
research can be considered a relevant source of knowledge for
understanding business phe-
nomena. The globalization of business and the related increase
in amount of published studies
concerned with the international aspects of management suggest
the need to map the IM field.
As a result, in the last decade management journals have
regularly published reviews of IM
research. These studies have mainly focused on the delimitation
of IM (Boddewyn, 1999;
Martinez & Toyne, 2000), on where IM works get generally
published (DuBois & Reeb, 2000;
†I am grateful to the Center for Globalization and Strategy at
IESE Business School for its support on this research
project. I thank Africa Ariño, Miguel Ángel Canela, Matteo
Prato, and Joan Enric Ricart for their helpful sugges-
tions on previous versions. I also thank Manuel Becerra and
three anonymous reviewers for thoughtful and detailed
comments that improved the article. This article was accepted
under the editorship of Russell Cropanzano.
*Corresponding author: Tel.: +34 93 253 4200; fax: +34 93 253
4343
E-mail address: [email protected]
Journal of Management, Vol. 35 No. 2, April 2009 199-218
DOI: 10.1177/0149206308321552
© 2009 Southern Management Association. All rights reserved.

199
Inkpen, 2001; Werner & Brouthers, 2002), on the methodologies
used (Yang, Wang, & Su,
2006), and on the IM topics selected (Acedo & Casillas, 2005;
Inkpen & Beamish, 1994;
Ricks, Toyne, & Martinez, 1990; Roth & Kostova, 2003;
Werner, 2002).
Although these published reviews have undeniably presented
some interesting insights
for the community of IM scholars, two major limitations
characterize this body of research.
First, most of these reviews failed to include a representative
sample of management jour-
nals when searching for IM contributions (Inkpen, 2001). Most
of the studies focused on a
restricted number of journals, frequently limiting their search to
journals exclusively cover-
ing international matters (Acedo & Casillas, 2005; DuBois &
Reeb, 2000). As a conse-
quence, their biased results did not provide a real sense of the
pervasiveness of IM
contributions in the mainstream management area. The few
studies that used a rather com-
plete list of top management journals as a base for their IM
reviews did not go further than
computing the total number of articles for each journal
scrutinized (Werner, 2002; Werner &
Brouthers, 2002). Therefore, no published review has yet
provided a thorough investigation
of the real prevalence of IM studies in top management
journals.

The second limitation has to deal with the time spans selected.
Most of the cited reviews
investigated articles published before 2000 (Acedo & Casillas,
2005; DuBois & Reeb, 2000;
Werner, 2002; Werner & Brouthers, 2002). Only two IM
reviews (Chan, Fung, & Leung, 2006;
Yang et al., 2006) included articles published after 2000.
However, in both cases the authors
analyzed only IM works published in a restricted number of
specialized international journals,
hence limiting the generalizability of their conclusions.
Therefore, scholars interested in
becoming familiar with IM research, understanding its
pervasiveness, and discovering the dif-
ferent journals’ publication patterns cannot rely on any of these
works for updated information.
The purpose of this study is to tackle these two limitations,
presenting an updated and
comprehensive review of the IM field. I divide the study into
two main parts. In the first, I
offer an updated reassessment of IM research, examining the
amount and type of IM research
published in 20 top management journals from 2002 to 2006.
The methodology used to
select and categorize IM works is identical to the one used by
Werner (2002) and Werner and
Brouthers (2002) in their reviews of IM research for the 1976-
1980 and 1996-2000 periods.
The use of the same method allows a comparison of the results
of the three studies that gives
an exhaustive overview of the evolution of IM research.
In the second part, I address the lack of studies that deal with
top management journals’

publication patterns in relation to the IM field. I select 10 top
management journals and thor-
oughly analyze their publication patterns relative to IM articles
for the 2002-2006 period. I
devote special attention to the initial selection of the journals
(Podsakoff, Mackenzie,
Bachrach, & Podsakoff, 2005) because it has often represented a
major weakness of previ-
ous IM reviews. Thus, this analysis contributes to the IM
literature by uncovering the posi-
tioning of top management journals with respect to their
exposure to IM research.
This article is accordingly structured. In the first section, I
focus on the replication of the
studies made by Werner (2002) and Werner and Brouthers
(2002). I illustrate the main
methodological issues, discussing the results and comparing
them with the ones obtained in the
other two studies. In the second section, I identify 10 top
management journals and compre-
hensively analyze their publication patterns relative to IM
research and its distinctive cate-
gories. A discussion of the main contributions and limitations of
the study concludes the article.
200 Journal of Management / April 2009
IM Research: An Updated Review
The objective of this section is to offer an updated review of
IM, investigating the amount
and type of IM research published in 20 top management
journals from 2002 to 2006. For

the analysis I used the same methodology used by Werner
(2002) and Werner and Brouthers
(2002) for the 1976-1980 and 1996-2000 periods. I opted for a
replication of such studies for
three reasons. First, these reviews are generally regarded as
well-crafted summaries of the
different streams of IM research for the time periods selected
(Ricart, Enright, Ghemawat,
Hart, & Khanna, 2004; Roth & Kostova, 2003). Second, they
use a fairly complete list of top
management journals as a basis of their review (Gomez-Mejia &
Balkin, 1992; Judge, Cable,
Colbert, & Rynes, 2007). Third, the replication allows me to
compare the results of the three
studies, providing a comprehensive perspective of the evolution
of IM research. As I repli-
cate previous works, I refer to them every time I use concepts
and assumptions formulated
by the other two authors in the development of their research.
IM Research Boundaries
IM research can be divided into three categories: pure IM
research, comparative man-
agement studies, and foreign domestic studies (Werner, 2002;
Werner & Brouthers, 2002).
First, pure IM research includes articles that look at the
management of firms in a multina-
tional context. It consists of studies that focus on the
international aspects of management
that do not apply to domestic enterprises (Ricks, 1991). Second,
comparative management
studies evaluate the management practices of different cultures
(cross-cultural studies) and
of different nations (cross-national studies) (Ricks, 1985; Ricks
et al., 1990). Finally, foreign

domestic studies look at management practices in a specific
country outside the United
States (Ricks, 1985).
Following Werner (2002), I focused only on studies that belong
to the pure IM research
category. Foreign domestic studies and comparative
management studies are not included
because their main focus is, respectively, to investigate and
compare local aspects of man-
agement in different countries and not to explore the
international dimensions of manage-
ment. For a matter of convenience in the further development of
the article I skip the term
pure every time I recall the pure IM research category and its
related studies.
IM Research Categories
I used 12 categories to organize and group works pertaining to
IM research (Werner,
2002; Werner & Brouthers, 2002). The list is quite
comprehensive because it covers all the
main aspects of the international aspects of management.
Although it should not be consid-
ered a definitive classification of IM research, it can be
regarded as a well-organized frame-
work to classify articles in this field (Werner, 2002). The
encompassing review offered by
Werner (2002) for the 1996-2000 period using this
categorization can be considered as proof
of its usefulness. Table 1 reports the categories and the main
topics included (see Werner,
2002, for a more detailed description of the categories).
Pisani / International Management Research 201

Top Management Journals
The selection of the journals used as sources of IM articles is a
critical moment in the
review process. The vast majority of reviews of IM research
failed to include a representa-
tive sample of management journals in the search for IM
contributions. For instance, many
reviews only used journals with an IM emphasis, thus greatly
reducing their articles’ impacts
(Acedo & Casillas, 2005; Chan et al., 2006; DuBois & Reeb,
2000; Yang et al., 2006).
Although this limitation has already attracted the attention of
other IM scholars (Inkpen,
2001), no published review has really tackled this issue.
For this first part of the study I used the same list adopted by
Werner (2002) and Werner
and Brouthers (2002). In processing their review, they used one
of the most established lists
of top management journals, which dates back to the
investigation of Gomez-Mejia and
Balkin (1992). Table 2 reports the entire list of 20 journals used
in their study. It coincides
with the full list obtained by Gomez-Mejia and Balkin (1992),
with the only difference that
it excludes the Harvard Business Review for its lack of focus on
academic research.
Although it is not recent, Gomez-Mejia and Balkin’s (1992) list
of 21 top management jour-
nals remains one of the most comprehensive. Judge et al. (2007)
used it as a basis for their recent

Table 1
Categories of International Management Research
Category Topics Included
1. Global business environment Global economy, global
markets, political and regulatory environments,
and international risk
2. Internationalization Description and measurement of
internationalization, antecedents and
consequences of internationalization
3. Entry mode decisions Predictors of entry mode choices,
predictors of international equity
ownership levels, and consequences of entry mode decisions
4. International joint ventures International joint venture partner
selection, IJV partner relations, and
consequences of IJV
5. Foreign direct investment The timing of FDI, motivations of
FDI, location of FDI, and firm and
host country consequences of FDI
6. International exchange International exchange, determinants
of exporting, export intermediaries,
and consequences of exporting
7. Transfer of knowledge Antecedents of knowledge transfer,
processes of knowledge transfer,
and consequences of knowledge transfer

8. Strategic alliances and networks Strategic alliance
relationships, networks of strategic alliances, and
outcomes of strategic alliances
9. Multinational enterprises Multinational enterprise strategies
and policies, and models and
descriptives of the multinational enterprise
10. Subsidiary–headquarters relations Subsidiary role (including
subsidiary strategies and typologies),
subsidiary control, and subsidiary performance
11. Subsidiary and multinational Subsidiary HRM practices,
subsidiary behaviors, multinational
team management negotiations, and multinational team
management
12. Expatriate management Expatriate human resource
management, issues for expatriates,
and expatriate and repatriate reactions
Source: Werner (2002).
Note: IJV = international joint ventures; FDI = foreign direct
investment; HRM = human resource management.
study on what causes a management article to be cited.
Furthermore, Podsakoff et al. (2005)
recently corroborated in their work that the list includes most of
the top influential management
journals of the last 2 decades. In the second part of the study,
when selecting 10 top manage-
ment journals for a detailed analysis of their IM publication
patterns, I further discuss this issue
and argue why the Gomez-Mejia and Balkin’s (1992) list,

although still valid, needs to revised.
The Review Process
The 20 selected top management journals published a total of
4,900 articles (book
reviews and editorials were not included) between January 2002
and December 2006. To
reduce the number of articles to be reviewed in order to search
for IM articles, as done by
Acedo and Casillas (2005), I performed a keyword search using
the Institute for Scientific
Information’s (ISI) Web of Knowledge database. I identified the
articles that referred to con-
cepts related to IM (international, multinational, global,
foreign, etc.) in the title, in the
abstract, or in the keywords. The result gave a total of 596
articles, which I collected to cre-
ate a database. Then, after reading the abstracts of the studies, I
categorized the 596 articles
by deciding whether they belonged to the IM field and, if they
did, in which IM category
they best fit. I found that 336 articles belonged to IM research
and thus I grouped them using
the 12 categories (the complete list of references sorted by the
corresponding publishing
journal is available on request). The categorization process was
not always straightforward,
Table 2
Top 20 Management Journals
Academic Journals

Academy of Management Journal
Academy of Management Review
Administrative Science Quarterly
Decision Sciences
Human Relations
Industrial & Labor Relations Review
Industrial Relations
Journal of Applied Behavioral Science
Journal of Applied Psychology
Journal of International Business Studies
Journal of Management Studies
Journal of Occupational Psychology
Journal of Organizational Behavior
Journal of Vocational Behavior
Management Science
Organizational Behavior and Human Decision Processes
Personnel Psychology
Psychological Bulletin
Strategic Management Journal
Sources: Gomez-Mejia and Balkin (1992) and Werner (2002).
because some of the articles potentially fell into more than one
category (Werner, 2002). To
categorize these dubious articles I read the entire study and
made a judgment call. Although
the final categorization for such articles remains debatable, the
fact that there were only 19
uncertain cases limited their influence on the results.
The methodology used for the review can be susceptible to a
major criticism concerning
the subjectiveness of the analysis. Reviews have generally been

carried out using either an
objective quantitative analysis based on bibliographic
measurements or, as in this case, a
subjective qualitative analysis based on the researcher’s
interpretation. Each approach has
advantages and disadvantages (Acedo & Casillas, 2005). The
main limitation of qualitative
analysis deals with the potential individual bias of the reviewer
that can influence the cate-
gorization process. At the same time, the subjectiveness of the
process can also be inter-
preted as providing a superior level of thoroughness in the
analysis of the individual articles
that cannot be guaranteed when bibliographic measurements are
used as the bases of the
review. To limit the potential bias of a unique assessment of the
studies, a second scholar
reviewed and categorized, using the same classification
(Werner, 2002), a random sample of
54 articles out of the 336 identified as IM works. In 85.2% of
the cases, her categorization
coincided with mine. Given the high level of consistency
obtained, I deemed it safe to pro-
ceed with my original categorization.
Results
Table 3 reports the number and respective percentage of the
articles within each category
and compares them with the results obtained by Werner (2002)
for 1996-2000.
Table 3
Number and Percentage of International Management Articles

per Category
1996-2000 Review
2002-2006 Review (Werner, 2002)
Category No. % No. %
1. Global business environment 31 9.2 23 8.5
2. Internationalization 48 14.3 34 12.5
3. Entry mode decisions 20 6.0 33 12.2
4. International joint ventures 32 9.5 25 9.2
5. Foreign direct investment 35 10.4 37 13.7
6. International exchange 8 2.4 15 5.5
7. Transfer of knowledge 34 10.1 16 5.9
8. Strategic alliances and networks 17 5.1 18 6.6
9. Multinational enterprises 42 12.5 16 5.9
10. Subsidiary–headquarters relations 19 5.7 18 6.6
11. Subsidiary and multinational team management 33 9.8 20
7.4
12. Expatriate management 17 5.1 16 5.9
Total 336 100 271 100
Chi-square test of independence χ2(11) = 24.54*, p = .01
*p < .05
The chi-square test of independence (χ2 = 24.54, p = .01)
showed that the distribution of
IM articles across categories significantly changed from one
time period to the other.
Although for most of the categories the changes over time were
minimal, for a few ones the
variation was important. Foreign direct investment and

internationalization represent two of
the three leading categories for both periods. In contrast,
multinational enterprises grew from
16 (5.9%) to 42 (12.5%) articles and knowledge transfer moved
from 16 (5.9%) to 34
(10.1%). International exchange evolved in the opposite
direction, from 15 (5.5%) articles to
8 (2.4%), and so did entry mode decisions, which moved from
33 (12.2%) to 20 (6.0%).
For a comparison that also includes the 1976-1980 period, I
categorized data according
to the publishing journal. For each period, I also calculated the
percentage of IM articles
published by every journal. This ratio provides a
straightforward estimate of how focused on
IM matters a journal is and whether its IM exposure has
increased or decreased over time.
Table 4 reports the results for each of the 20 journals and
compares the results with the find-
ings obtained by Werner (2002) and Werner and Brouthers
(2002).
Table 4
Number and Percentage of International Management (IM)
Articles per Journal
1996-2000 Review 1976-1980 Review
2002-2006 Review (Werner, 2002) (Werner & Brouthers, 2002)
Total Total IM Total Total IM Total Total IM
Articles Articles Articles Articles Articles Articles
Academic Journals 2002-2006 2002-2006 % 1996-2000 1996-

2000 % 1976-1980 1976-1980 %
Journal of International Business Studies 207 147 71.0 199 128
64.3 124 55 a 44.4
Strategic Management Journal 343 57 16.6 337 53 15.7 24 3
12.5
Journal of Management Studies 321 37 11.5 192 19 9.9 107 6
5.6
Academy of Management Journal 296 23 7.8 291 24 8.2 289 3
1.0
Academy of Management Review 175 14 8.0 203 6 3.0 322 4
1.2
Management Science 617 11 1.8 629 6 1.0 717 3 0.4
Journal of Management 204 11 5.4 184 5 2.7 45 0 0.0
Human Relations 282 10 3.5 302 4 1.3 340 4 1.2
Journal of Applied Psychology 500 6 1.2 397 3 0.8 533 0 0.0
Journal of Organizational Behavior 253 4 1.6 270 5 1.9 21 0 0.0
Administrative Science Quarterly 87 3 3.4 129 2 1.6 161 1 0.6
Industrial & Labor Relations Review 153 3 2.0 163 6 3.7 181 1
0.6
Industrial Relations 154 3 1.9 145 2 1.4 200 0 0.0
Decision Sciences 128 2 1.6 199 5 2.5 293 0 0.0
Journal of Applied Behavioral Science 145 2 1.4 158 1 0.6 167
0 0.0
Personnel Psychology 131 2 1.5 151 2 1.3 205 0 0.0
Journal of Vocational Behavior 287 1 0.3 244 0 0.0 322 0 0.0
Journal of Occupational Psychology 159 0 0.0 143 0 0.0 142 0
0.0
Organizational Behavior and 231 0 0.0 342 0 0.0 274 0 0.0
Human Decision Processes
Psychological Bulletin 227 0 0.0 206 0 0.0 459 0 0.0
Total 4900 336 6.9 4,884 271 5.5 4926 80 1.6
Chi-square test of independenceb χ2(14) = 31.58**, p = .005

a. Not reported by Werner and Brouthers (2002); obtained
reviewing the 124 articles.
b. The chi-square test is restricted to the entries of the first
eight journals listed in the table relative to the three periods.
**p < .01
A chi-square test of independence (χ2 = 31.58, p = .005)
restricted to the eight journals
that published most of IM research in the 2002-2006 period (in
Table 4 they correspond to
the first eight journals listed) confirmed that a significant
change occurred over time. The
clearest changes occurred with respect to the end of the 1970s.
Indeed, a chi-square test of
independence restricted to the entries of the eight journals
relative to the two more recent
periods (χ2 = 9.27, p = .23) showed that no significant change
took place in the last decade.
Figure 1 illustrates the main trends relative to the eight journals
selected.
The three studies confirm the predominance of the Journal of
International Business
Studies as the main publisher of IM research. The difference
between the percentage of IM
publications in this journal and of all the others remained
enormous over time. The Strategic
Management Journal and the Journal of Management Studies
also maintained their position
in the rankings, being respectively the second and third most
focused IM publishers.
Looking at the concentration of IM research, it is interesting to

verify that these eight jour-
nals maintained their role of top IM publishers from the late
1970s until 2006. The findings
show that these eight outlets published 97.5% of all IM research
that appeared in the 20
IM Publications over Time
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
Human Relations
Management Science
Academy of Management
Review
Academy of Management
Journal
Studies
Strategic Management
Journal
Journal of International
Business Studies
2002-2006 1996-2000 1976-1980
Figure 1
International Management Publications Over Time

selected top management journals from 1976 to 1980, 90.4% of
all the IM research that
appeared from 1996 to 2000; and 92.3% of all the IM research
from 2002 to 2006. Therefore,
the remaining 12 top management journals were responsible for
about 10% of all IM publi-
cations per period, thus maintaining a marginal role in the
evolution of IM research.
Comparing the results between the two more recent periods
shows that IM research
steadily increased its presence in the management area. The
results show that whereas 5.5%
of all the articles published from 1996 to 2000 in the 20
journals were focused on IM matters
(Werner, 2002), this percentage increased to 6.9% for the 2002-
2006 period. A chi-square
test of comparison of the two proportions (χ2 = 7.20, p = .01)
confirmed that this increase
represents a significant step in the internationalization of the 20
journals selected. Looking
at the individual journals, we find that the Academy of
Management Review substantially
augmented its exposure to IM research. In contrast, the
Academy of Management Journal
even decreased its percentage of IM articles, being the only
journal to reduce its relative cov-
erage of IM articles.
In sum, this updated review confirms the increasing IM
presence in top management
journals. Although in the 1976-1980 period only 1.6% of the
articles published in the 20
journals belonged to IM research, almost 7% of articles

published in 2002-2006 could be
attributed to IM research. The distribution of IM research across
categories and journals did
not dramatically change. There was a high concentration of IM
articles in a few top man-
agement journals, with the Journal of International Business
Studies being the leading IM
publisher. Although the degree of concentration remains a
relative concept, the fact that of
20 journals considered, the 4 most active IM publishers (i.e.,
the top 20%) were responsible
for about 80% of all IM publications in the sample makes it
reasonable to delineate a high
concentration of IM articles in a few top management outlets.
With respect to the topics
selected, there were significant variations in the relative
weights of some of the categories in
2002-2006. Issues relative to the models of the multinational
enterprise and to their ability
to transfer knowledge have recently been the object of an
increasing number of studies.
Top Management Journals and Their IM Publication Patterns
The main goal of this section is to further our understanding of
the pervasiveness of IM
research in top management journals, thus investigating their
IM publication patterns. No pub-
lished review of IM research has yet carefully examined this
relevant topic. Although many
reviews have simply ignored the issue over the years (Chan et
al., 2006; Martinez & Toyne,
2000; Ricks et al., 1990; Roth & Kostova, 2003), the ones that
marginally addressed it either
failed to include a reasonable sample of top management
journals as a base of their work or

did not provide a detailed analysis (Acedo & Casillas, 2005;
DuBois & Reeb, 2000; Inkpen &
Beamish, 1994; Lu, 2003; Morrison & Inkpen, 1991; Werner,
2002; Werner & Brouthers,
2002). Most of the IM reviews restricted their attention to IM
publications appearing in jour-
nals exclusively focused on international matters. The most
widely used IM journals
employed in such reviews were the Journal of International
Business Studies, Management
International Review, International Business Review, and the
Journal of World Business
(Acedo & Casillas, 2005; Chan et al., 2006; DuBois & Reeb,
2000; Inkpen & Beamish,
1994). An examination of the 2006 ranking of top management
journals based on their
impact factor obtained from the ISI’s Web of Knowledge
database showed that among these
IM-focused journals, only the Journal of International Business
Studies appeared in the list
of the top 20. It is true that Management International Review is
not yet tracked by ISI and
International Business Review has only recently joined its
rankings; however, it seems rea-
sonable to assume that neither of them would likely be included
in the list of the current 20
leading journals in the realm of management. Therefore,
although the reviews exclusively cov-
ering such IM-focused journals certainly provided a thorough
analysis of their IM publica-
tions (DuBois & Reeb, 2000), they failed to indicate the

pervasiveness of IM research in the
mainstream management area (Inkpen, 2001).
The only two reviews that used a fairly representative list of top
management journals as
a base for their search of IM contributions are the ones of
Werner (2002) and Werner and
Brouthers (2002), on which I based the updated review reported
in the previous section. Yet,
because of two major limitations, these studies were unable to
provide a thorough analysis
of top management journals’ IM publication patterns. First, the
list of 20 top management
journals used (Gomez-Mejia & Balkin, 1992), although still
valid, omits a few very influen-
tial management outlets. Second, Werner (2002) and Werner
and Brouthers (2002) did not
specifically examine the IM publication patterns of the selected
journals. These articles pro-
vide nothing beyond what was reported in the previous section
in terms of understanding
how top management journals position themselves with respect
to IM research topics.
This section aims thus at addressing such limitations, providing
the reader with a practi-
cal map of top management journals’ IM publication patterns.
The analysis is particularly
useful for IM scholars interested in determining whether
particular journals favor specific
research categories within the IM field and, if they do, on which
ones they focus. Building
on the results of the updated review of the previous section, this
work aims at contributing
to the IM literature by investigating the positioning of leading
management journals with

respect to their current exposure to IM research topics.
Top Management Journals
The selection of the journals on which to base the search for IM
articles is a critical but
underestimated moment in the review process. As already
discussed in the previous section,
Werner (2002) and Werner and Brouthers (2002) employed one
of the most commonly used
lists of top management journals (Judge et al., 2007; Van Fleet,
McWilliams, & Siegel, 2000)
developed by Gomez-Mejia and Balkin in 1992. The recent
work of Podsakoff et al. (2005),
who investigated the influence of management journals in the
1980s and 1990s, corroborates
the overall validity of this list. Of the 21 management journals
identified by Gomez-Mejia
and Balkin (1992), 19 were among the list of 20 top journals
ranked according to the aver-
age citations per article published (Podsakoff et al., 2005). This
measure, also called impact
factor, is frequently used as a proxy to determine the relative
influence of journals in their
corresponding fields (DuBois & Reeb, 2000; Judge et al., 2007;
Podsakoff et al., 2005).
Therefore, should the Gomez-Mejia and Balkin’s (1992) list be
revised? Although it is
still valid, a minor revision of the list would greatly improve its
representativeness of top
management journals. Using ISI’s Web of Knowledge database,
I obtained the 2006 ranking

of management journals based on their impact factor. When I
compared the results obtained
by Podsakoff et al. (2005), the ranking provided by ISI Web of
Knowledge, and Gomez-
Mejia and Balkin’s list, two major issues arose. First, the
Journal of Applied Behavioral
Science should not be considered a top management journal,
because it appears only in
Gomez-Mejia and Balkin’s list. Second, Organization Science
and Organization Studies
should be included in the list of 20 top management journals
because they currently have 2
of the 20 highest impact factors in the management field.
Consequently, I selected the following 10 journals to perform a
detailed analysis of their
IM publication patterns: Journal of International Business
Studies, Strategic Management
Journal, Journal of Management Studies, Academy of
Management Journal, Academy of
Management Review, Management Science, Journal of
Management, Human Relations,
Organization Science, and Organization Studies. The first eight
journals belong to the orig-
inal list of Gomez-Mejia and Balkin (1992), and the results
from the previous section con-
firmed them to be the leading publishers of IM research. I added
Organization Science and
Organization Studies to improve the comprehensiveness of the
list.
Finally, for the first part of the analysis, I also included the
Management International
Review, an IM-focused journal widely acknowledged as being

the second most influential
outlet in the realm of IM after the Journal of International
Business Studies (DuBois &
Reeb, 2000). Although this journal is not tracked by ISI, its
inclusion here is very useful
because it offers a relevant reference point for interpreting the
results corresponding to the
Journal of International Business Studies, which would
otherwise be the only IM-focused
journal in the sample.
The Review Process
To search for and categorize IM articles, I used the same
methodology used in the previ-
ous section to update Werner’s (2002) review. In other words, I
collected all the articles
(book reviews and editorials were not included) published in the
selected journals from
January 2002 to December 2006. I performed the same keyword
search to reduce the number
of potential IM articles to be reviewed and I grouped the
articles using the same categoriza-
tion. For the eight journals included in Gomez-Mejia and
Balkin’s (1992) list, I used the
results reported in the previous section. For the two newly
included journals tracked by ISI,
Organization Science and Organization Studies, I proceeded to
analyze the 86 articles iden-
tified through the keyword search. Thirty-four articles belonged
to IM research and were
thus grouped using the 12 categories. In three cases I read the
entire studies before deciding
on their categorization because they potentially fell into more
than one category. With
respect to the Management International Review, I analyzed the

183 articles published in
2002-2006 and categorized the 139 articles that belonged to IM
research.
Results
The main results of the categorization process relative to the
three additional journals con-
sidered are the following. Management International Review
published a total of 183 articles
in 2002-2006, of which 139 (76%) belonged to IM research. In
the same period,
Organization Science published 228 articles with 20 (8.8%)
belonging to IM research,
whereas Organization Studies published 297 articles with 14
(4.7%) being IM studies. These
initial findings immediately confirm the relevance of including
Organization Science and
Organization Studies in the sample of top management journals.
With their respective 20 and
14 IM articles, they were among the leading publishers of IM
research in 2002-2006. In
addition, for the 2002-2006 period these two outlets together
published more IM articles (34)
than the 12 top management journals included in the original
list of Gomez-Mejia and Balkin
(1992) and excluded for the analysis in this section (26). This
result corroborates, on one
side, the high degree of concentration of IM articles in few top
management journals and, on
the other, the soundness of the sample of journals selected.

In relation to the results corresponding to the Management
International Review and their
comparison with the results obtained for the Journal of
International Business Studies, the
fact that both of them published more than 70% of their articles
on IM matters confirms their
clear focus on the investigation of international dimensions of
management.
Using the 310 IM articles corresponding to the eight journals
already considered in the
previous section and the 173 IM articles obtained from the
examination of the three addi-
tional outlets included, I investigated the type of IM research
that each journal tended to pub-
lish more often. In other words, I examined how many IM
articles belonging to a specific
category were published by each journal. Table 5 reports the
number and respective per-
centage of IM articles in each of these journals by categories for
2002-2006.
An interesting finding is that the two IM-focused journals
showed a very homogeneous dis-
tribution of IM articles across categories with only a few
marked differences. Both outlets pub-
lished practically the same number of IM research articles in 8
of the 12 categories. However,
the Journal of International Business Studies concentrated much
more on the entry mode deci-
sion and the foreign direct investment, whereas the Management
International Review focused
more on the transfer of knowledge and the multinational
enterprises categories.

Another interesting result is that the four journals that
published the most IM research
tended to publish articles from almost all the categories, thus
practically covering the entire
range of topics. In the case of the Journal of International
Business Studies, the Management
International Review, the Strategic Management Journal, and
the Journal of Management
Studies, none of the categories weighted more than 20%.
Nonetheless, as already discussed
for the two IM-focused outlets, these journals differed in their
publishing patterns regarding
the content of IM research. For instance, both the Journal of
International Business Studies
and the Strategic Management Journal devoted most of their
attention to internationalization
(respectively, 14.3% and 19.3%), foreign direct investment
(13.6% and 15.8%), and multi-
national enterprises (15.0% and 15.8%). However, only the
Strategic Management Journal
also focused on strategic alliances and networks (2.7% and
8.8%) and subsidiary–headquar-
ters relations (5.4% and 10.5%). Beyond internationalization
(18.9%) and multinational
enterprises (13.5%), the Journal of Management Studies also
devoted major attention to
entry mode decisions (13.5%) and subsidiary and multinational
team management (13.5%).
The other seven journals specialize in a limited number of
categories within IM and thus
tend to become a reference point for a few specific IM research
substreams. For instance,
roughly half of the IM articles published in the Academy of
Management Journal belonged

211
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to either the internationalization or the expatriate management
categories. In the Academy of
Management Review, half of the IM articles published dealt
with either the global business
environment or the multinational enterprises. Management
Science manifestly focused on
knowledge transfer, publishing more than 60% of its IM articles
only on this topic.
Organization Science also had a clear focus on knowledge
issues, publishing roughly one
third of its IM articles on this subject. Organization Studies
published half of its IM articles
on the global business environments and the subsidiary and
multinational team management.
Finally, the Journal of Management and Human Relations also
concentrated mainly on two
categories, publishing about 50% of their IM articles on the
subsidiary and multinational
team management and on the strategic alliances and networks. It
is also worth of note that
the Journal of Management was the only journal that published

roughly 20% of its IM arti-
cles on international joint ventures.
To further our understanding on the different IM publication
patterns of top management
journals, I considered the 10 top journals tracked by ISI, thus
excluding from the previous
list the Management International Review, and classified each
of their IM articles per jour-
nal, category, and year of publication. Therefore, I created a
variable Xcjt, which corresponds
to the number of IM articles belonging to category c, published
by journal j at time t; c
ranges from 1 to 12 and corresponds to the categorization used
until now; j ranges from 1 to
10 and corresponds to the list of 10 journals selected; and t
ranges from 2002 to 2006. Using
this variable I investigated how journals modify their relative
IM exposure over time and
their role in the evolution of the relative weights of the 12
categories. By tracking yearly vari-
ations in the publication rates of journals, this analysis is
particularly sensitive to the pres-
ence of IM-oriented special issues in a given year. Although it
is true that the publication of
a special issue can possibly skew the results for the
corresponding year, the decision of a
journal to devote more attention to a particular IM topic
remains worthy of note because it
represents an important element of its IM publication pattern.
Figures 2 and 3 illustrate the
main trends characterizing IM publications in 2002-2006.
The Journal of International Business Studies regularly
published slightly more than 40%
of all the IM articles published yearly. Although its weight was

fairly constant over the years
studied, the weights of the other two main IM publishers
underwent more variation. The
Strategic Management Journal moved from publishing almost
30% of all IM articles in 2002
to publishing only about 10% of IM research in 2006. Similarly,
the Journal of Management
Studies moved from 3% in 2002 and 2004 to 19% in 2005.
In contrast, the six journals that published less IM research saw
their accumulated weights
steadily increase over the years studied, with the only exception
of 2005. In particular, the
relative IM exposure of the Academy of Management Review
and Management Science expe-
rienced the most stable growth during the time period studied.
In sum, although more than
65% of the IM articles regularly appeared in only three journals,
Figure 2 illustrates a pat-
tern in which journals that were characterized by a restricted
and more specific IM exposure
steadily increased their relative weights in the publication of IM
articles. Although 5 years
are not enough to make stronger judgments, the increasing
yearly attention to IM matters
demonstrated by these journals could be interpreted as a sign of
their greater awareness of
the importance of IM research.
Figure 2
Relative Weights of Journals in 2002-2006

Journals’ Relative Weights in the Past Five Years
0% 20% 40% 60% 80% 100%
2002
2003
2004
2005
2006
1. Journal of International Business Studies
3. Journal of Management Studies
5. Organization Science
7. Academy of Management Review
9. Journal of Management
2. Strategic Management Journal
4. Academy of Management Journal
6. Organization Studies
8. Management Science
10. Human Relations
1
1
1
1
1

2
2
2
2
2
3
3
3
3
3
4
4
4
4
4
5
5
5

5
5
6
6
6
6
6
7
7
7
7
7
8
8
8
8
9
9

9
9
9
10
10
10
10
8
Figure 3
Relative Weights of International Management Categories in
2002-2006
0% 20% 40% 60% 80% 100%
2002
2003
2004
2005
2006
1. Global business environment
3. Entry mode decisions
5. Foreign direct investment
7. Transfer of knowledge

9. Multinational enterprises
11. Subsidiary and multinational team management
2. Internationalization
4. International joint ventures
6. International exchange
8. Strategic alliances and networks
10. Subsidiary - HQ relations
12. Expatriate management
1
1
1
1
2
2
2
2
2
3
3
3
3

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Figure 3 highlights some interesting patterns in relation to the
12 categories used to orga-
nize IM research. Although some of the categories maintained
constant relative weights over
the years studied, others reduced their comparative presence.
For instance, internationalization
and foreign direct investment were constantly chosen as main
topics in roughly 25% of all IM
research studies published yearly. International exchange and
entry mode decisions decreased
their relative presence, corroborating the trend observed in
Table 3 when comparing the 1996-
2000 and 2002-2006 periods. In contrast, four categories
experienced a noteworthy increase in
their relative weights in 2002-2006. The global business
environment, the subsidiary and multi-
national team management, and, in a more irregular manner, the
transfer of knowledge and the
multinational enterprises categories increased in relative
importance.
The global business environment category has gained centrality

as a consequence of the
increasing internationalization of economic activities. IM
scholars have progressively focused
their attention on emerging economies and their peculiar
institutional environments (Henisz
& Zelner, 2005; Meyer & Peng, 2005; Vaaler, Schrage, &
Block, 2005). Environmental
matters have also gained prominence as a result of increased
awareness of this topic (Child &
Tsai, 2005; Christmann, 2004; Christmann & Taylor, 2006).
Moreover, issues concerned with
corporate governance and its evolution in a more globalized and
interconnected world have
been the focus of an increasing number of studies (Aguilera &
Cuervo-Cazurra, 2004; Drori,
Yang, & Meyer, 2006; Khanna & Palepu, 2004; Weitzel &
Berns, 2006). The Journal of
International Business Studies and the Academy of Management
Review have published the
most IM articles dealing with these subjects recently.
The increases in the other three categories possibly document
how management scholars
are adapting their IM research to the maturation of the
knowledge-based economy and the
deepening integration of international economic activities that
occurred in the last decade
(Dunning, 2000). Wealth-creating activities have become much
more knowledge intensive
than before, and recent technological progress has given
companies the opportunity to grow
on a global scale (Doz, Santos, & Williamson, 2001). Such
changes have radically altered
the way multinational enterprises compete in global markets:
Whereas 20 years ago the com-
petitive advantage of firms was predominantly based on their

capacity to internally produce
and organize proprietary assets and purposefully match them to
local market needs, in the
past decade the emphasis has moved to firms’ capabilities to
access and organize knowledge
intensive assets worldwide (Dunning, 2000).
IM scholars are increasingly focusing their research efforts on
new models and strategies
for multinationals that can match the growing level of global
integration characterizing a
number of industries (Kim, Park, & Prescott, 2003; London &
Hart, 2004; Meyer, 2006).
Because companies now have the technological option to
efficiently migrate a number of
white-collar activities to offshore locations (Doh, 2005), the
capacity of transferring knowledge
across multiple settings is becoming a key research topic
(Cummings, 2004; Hansen & Lovas,
2004; Martin & Salomon, 2003). The related creation of
globally distributed professional
teams has generated new challenges related to the management
of multinational teams. The
concept of global virtual teams (Hinds & Bailey, 2003; Hinds &
Mortensen, 2005; Metiu,
2006) has thus gained centrality in IM studies and has
significantly contributed to the increased
focus on subsidiary and multinational team management. The
Journal of International
Business Studies has published most of the IM articles for each
of the three categories. The
Strategic Management Journal has been an important platform
for studies concerned with the

models and the strategies of multinational enterprises,
Management Science for issues rela-
tive to the transfer of knowledge, and Organization Science for
works on geographically dis-
tributed teams.
Discussion and Conclusion
The objective of this article was to tackle two major limitations
identified in the body of
published IM reviews. The first limitation was their failure to
include a representative sam-
ple of management journals when searching for IM
contributions (Inkpen, 2001). Previous
reviews focused on a restricted number of journals, often
limiting their search to journals
exclusively dedicated to international matters (Acedo &
Casillas, 2005; DuBois & Reeb,
2000). This led to biased results that did not provide a real
sense of the pervasiveness of IM
contributions in the mainstream management area. The second
limitation was the time peri-
ods considered, because most of the reviews investigated IM
articles published before 2000
(Acedo & Casillas, 2005; DuBois & Reeb, 2000; Werner, 2002;
Werner & Brouthers, 2002).
The purpose of this study was to thoroughly review IM research
and address these two
limitations. In the first section, I provided an updated
reassessment of IM, examining the
amount and type of IM research published in 20 top
management journals from 2002 to
2006. By using the methodology of Werner (2002) and Werner

and Brouthers (2002), I was
able to compare results across the different studies, hence
providing a comprehensive review
of the field. In the second section, I identified patterns in the
publication of IM research in
leading management journals, which resulted in some
interesting findings.
My aim in this work was to contribute to the IM literature on
two grounds. This article
provides an updated picture of the field, and it uncovers the
current positioning of leading
management journals with respect to their exposure to IM
research. Findings from this study
may prove extremely valuable for IM scholars interested in
understanding the evolution of
IM research over time and the different IM publication patterns
of top management journals.
The main conclusions of this study are the following. The
findings confirm the generalized
notion (Inkpen, 2001; Werner, 2002; Werner & Brouthers,
2002) that IM is steadily increasing
its presence in the management area. Although in the 1976-1980
period only 1.6% of the arti-
cles published in the 20 selected journals belonged to IM
research (Werner & Brouthers, 2002),
in 1996-2000 this percentage rose to 5.5% (Werner, 2002) and
in 2002-2006 it reached almost
7%. In terms of the distribution of IM research across categories
and journals, no dramatic
changes have occurred, especially in the last decade. The
Journal of International Business
Studies continues to be the reference point for IM research.
Furthermore, there continues to be
a high degree of concentration of IM studies in a few academic

journals. Eight of the 20 jour-
nals considered have consistently published more than 90% of
all IM research over time, with
this figure being confirmed also for the 2002-2006 period.
The investigation of top management journals’ IM publication
patterns provides insight-
ful indications of how outlets differentiate themselves in their
exposure to IM topics. A pre-
liminary discussion on the selection of leading management
journals led to the update of
Gomez-Mejia and Balkin’s (1992) list of top management
journals, with the inclusion of
Organization Science and Organization Studies. These two
outlets proved to be important
publishers of IM research and confirmed the relevance of their
inclusion.
In terms of the IM publication patterns of the management
journals selected, the results
show that the journals that published most of IM research
during the period studied, namely
the Journal of International Business Studies, the Management
International Review, the
Strategic Management Journal, and the Journal of Management
Studies, demonstrated a
more balanced distribution of published articles across the 12
categories. Conversely, the
management outlets that published a limited amount of IM
research tended to specialize in
a few categories and consequently published mainly works
related to a few IM research sub-

streams. This fact is rather ordinary in the academic world,
because it is often the case that
a specific journal becomes the preferred and sometimes the only
legitimate academic plat-
form for discussing a particular management research topic.
A more fine-grained analysis of the 2002-2006 period reveals
some interesting material
with which to discuss key questions about the development of
IM research. Why does IM
research continue to be highly concentrated in a few top
management journals? The results
show that outlets that published less IM research tended to
specialize in very few IM cate-
gories. However, a yearly analysis of 2002-2006 confirms an
emerging pattern in which jour-
nals that were characterized by a restricted and more specific
IM exposure steadily increased
their relative weights in the publication of IM articles. I hope
this is a sign of their increased
awareness of the importance of IM research in the management
area. It is difficult to fore-
cast whether their specialization in few IM categories will harm
their further exposure to IM
research. Yet, the tendency to publish articles on few IM topics
does not seem to be the only
important constraint. Issues related to the number and quality of
IM articles submitted to
such journals as well as the presence of IM scholars on these
journals’ editorial boards seem
to be relevant in understanding their current limited exposure to
IM research.
Another key question deals with the direction of IM research in
terms of its content: Will
certain categories become more relevant than others in the

development of the IM field? The
results of this review provide a preliminary answer by
delineating a surge of interest in four
categories. The global business environment is gaining
prominence because the analysis of
the institutional variables of developing countries is becoming
fundamental in understand-
ing the globalization of business. Multinational enterprises are
changing their business
models and strategies to compete in newly internationalized
markets. Recent progress in
telecommunications technology has reduced the costs of
operating remotely (Nachum &
Zaheer, 2005), giving companies the opportunity to globally
source individual value activi-
ties. How to transfer knowledge across subsidiaries and how to
handle geographically dis-
tributed teams are topics that are attracting increasing research
efforts in IM research. This
trend is expected to become even clearer, as multinational
corporations are rapidly reconfig-
uring themselves as “portfolios of capabilities and relationships
positioned within a global
network of business processes” (Venkatraman, 2004: 16).
This study is not exempt of limitations. The subjective
methodology used and its related dis-
advantages have already been discussed here. Furthermore, the
analysis of the journals’ publi-
cation patterns does not include changes in their editorial
boards. The difficulty of including
such data is not related to the availability of this kind of
information. Other studies have already
used it, for example, to rank schools with an international
business orientation (Chan et al.,
2006). The complexity lies instead in the fact that it is difficult

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