Behavioural theory and MNE decision-making: changing the narrative in international business management

Traditional international management theories tend to overlook that the cognitive limitations and biases of decision-makers may bound their ability to make rational, objective strategic choices. Most theories have not truly accounted for firm heterogeneity either, i.e. explaining why in similar contexts, two multinational enterprises (MNEs) may make different choices. This heterogeneity is not always rooted in differences in ‘firm-specific’ or ‘ownership’ advantages. We zoom in on how behavioural concepts, such as cognitive biases, heuristics and reference points, have the potential to complement extant MNE theorising. This chapter discusses the importance of using theories that make more realistic assumptions about MNE decisions and decision makers and are thus more suited to claim managerial relevance.