Journal of Teaching in International Business

ISSN: 0897-5930 (Print) 1528-6991 (Online) Journal homepage: http://www.tandfonline.com/loi/wtib20

Relevance and Rigor in International Business

Teaching: Using the CSA-FSA Matrix

Simon C. Collinson & Alan M. Rugman

To cite this article: Simon C. Collinson & Alan M. Rugman (2011) Relevance and Rigor in
International Business Teaching: Using the CSA-FSA Matrix, Journal of Teaching in International
Business, 22:1, 29-37, DOI: 10.1080/08975930.2011.585910

To link to this article: http://dx.doi.org/10.1080/08975930.2011.585910

Published online: 21 Jun 2011.

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 Journal of Teaching in International Business, 22: 29–37, 2011
Copyright © Taylor & Francis Group, LLC
ISSN: 0897-5930 print / 1528-6991 online
DOI: 10.1080/08975930.2011.585910

Relevance and Rigor in International Business Teaching:

Using the CSA-FSA Matrix
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Simon C. Collinson
Professor of International Business and Innovation, Warwick Business School,
The University of Warwick, Coventry, United Kingdom

Alan M. Rugman
School Director of Research, Professor of International Business, Henley Business School,
University of Reading, Reading, United Kingdom

We advance three propositions in this paper. First, teaching international business (IB) at any level
needs to be theoretically driven, using mainstream frameworks to organize thinking. Second, these
frameworks need to be made relevant to the experiences of the students; for example, by using them
in case studies. Third, these parameters of rigor and relevance need to be seamlessly integrated. We
then demonstrate these principles using Rugman’s CSA-FSA matrix, describing both the theoretical
and practical value of the framework.
keywords: IB strategy, Case studies, Kenya, Cut flowers, IB theory

1. INTRODUCTION

We advance three propositions in this paper. First, teaching international business (IB) at any
level needs to be theoretically driven, using mainstream frameworks to organize thinking. Second,
these frameworks need to be made relevant to the experiences of the students; for example, by
using them in case studies. Third, these parameters of rigor and relevance need to be seamlessly
integrated. We first introduce the idea that a balance between rigor and relevance is central to
management and business studies in general and IB in particular. We then present Rugman’s
(1981) CSA-FSA matrix, using the Oserian flower company case study as an example of how
theory and practice can be connected in good textbooks (Rugman & Collinson, 2009) and the
classroom context.

2. THE RELEVANCE OF RIGOR

There has been much discussion by leading scholars in management and business studies (and
the social sciences more generally) about the need to meet the “double hurdles” of academic rigor

Correspondence should be addressed to Simon C. Collinson, Warwick Business School, The University of Warwick,
Coventry CV4 7AL, UK. E-mail: simon.collinson@wbs.ac.uk; a.rugman@henley.reading.ac.uk
 30 COLLINSON AND RUGMAN

and practical or managerial relevance in our research (Pettigrew, 2001; Van de Ven & Johnson,
2006). These elements mutually reinforce each other and both are necessary for high quality
teaching and textbooks (Tushman, O’Reilly, Fennollosa, Kleinbaum, & McGrath, 2007).
A central role of academic research is to test and refine theory. In fact, established theories
can be described as “explanations of reality that have been rigorously tested such that most
(social) scientists agree on them.” The robustness of academic debates, empirical studies, and
the peer-review publishing process ensure that theories and frameworks are rigorously assessed
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and refined or replaced. Those that continue to survive through this ongoing testing process are
proven guides to the way the world works. This overall process combines rigor and relevance.
Students often ask why we need theory. In response we need to demonstrate how theories
are analytical tools for explaining, as well as for understanding and making predictions about a
given subject. The value of theory in the classroom and in textbooks lies in the way it can both
simplify and clarify the complexities of the real world, providing heuristics for practitioners. Not
only do theoretical frameworks make the world easier to understand, they provide structures for
data-gathering, filtering, prioritizing, and analyzing information.
Simple analytical frameworks, such as the SWOT (strengths, weaknesses, opportunities, and
threats) matrix in strategy and the PEST (political, economic, social, and technological) in IB
are widely used in practice as a starting point for management decision-making (Jarzabkowski &
Kaplan, 2008). They provide simple guides for examining key factors inside and outside the firm
as part of the decision-making process.
One of the main functions of analytical frameworks in IB studies is comparison. As stated
in Collinson and Pettigrew (2009), the comparative method is our main tool for measuring this
variety and assessing its implications for business and management:
The comparative method lies at the heart of social science research. Comparisons of individuals,
groups, organizations, networks, or nations allow us to map and measure similarity and variation,
helping us to understand the sources of difference and explain distinctiveness. Comparisons of places
provide an understanding of regional variation and comparisons over time allow us to examine the
past and the present and anticipate the future. (p. 765)

In the field of IB, it is national and regional diversity—the (economic, social, political, cul-
tural, and business-related) differences between places that influence business activities and
management behavior—that matter. Many of the theories and conceptual frameworks in the field
have therefore been developed for comparing location endowments as well as the differentiating
characteristics of firms.

3. RIGOR AND RELEVANCE IN IB

IB is a broad topic, but there is some degree of consensus among experienced teaching faculty
in the IB area regarding the set of core frameworks that bridge theory and practice and would
be included in the IB curriculum. In many cases, these are appropriately associated with leading
thinkers in the field, such as John Dunning’s (1988) eclectic paradigm (the “OLI” framework)
and Bartlett and Ghoshal’s (1991) integration-responsiveness trade-off framework (and studies
of the sources of global competitive advantage). For the remainder of this paper we focus on
Rugman’s CSA-FSA matrix (Figure 1) as one such framework.
 INTERNATIONAL BUSINESS TEACHING: CSA-FSA MATRIX 31
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FIGURE 1 The Country-Specific Advantage (CSA)–Firm-Specific

Advantage (FSA) Framework (color figure available online).
• Cell 1: Here, IB strategies are determined by country factors alone;
for example, MNEs will harvest natural resources and engage in mineral
extraction and processing. There will be low labor cost businesses, such
as offshoring manufacturing to China.
• Cell 4: Here, country factors are unimportant and a pure resource-based
view suggests that MNEs are successful entirely through FSAs; these
include the international marketing of brand products and services, the
use of managerial resources and skills and systems integration, and other
FSAs that are unique and idiosyncratic to the MNE.
• Cell 2: Here are weak CSAs and FSAs, indicating that IB will only
occur on an opportunistic (not strategic) basis; for example, with firms
and entrepreneurs suffering from the born global illusion complex.
• Cell 3: Here, both CSAs and FSAs are strong such that only IB theory
can explain how MNE managers can operate in this special strategic space.
Here the strong CSAs of Cell 1 can be turned into strong FSAs through
managerial skills; for example, Canadian pulp and paper and newsprint
firms can secure long-term relational contracts with key customers, an oil-
producing firm can use vertical integration to refine and market petroleum
products, and a pharmaceutical firm can use horizontal integration to turn
home country R and D into international sales.

4. THE CSA-FSA FRAMEWORK—IN THEORY

In its early days, the teaching of IB was often aligned to a descriptive discussion of four coun-
try level factors—economics, politics, culture, and finance—as they might affect IB. Following
Rugman (1981), we now identify these as country-specific advantages (CSAs). Other authors
develop similar analysis of exogenous country-level factors, such as the CAGE framework of
Ghemawat (2007).
These CSAs need to be linked to institutions active across national borders. The key actor on
the stage of IB is the multinational enterprise (MNE). The MNE is defined as a firm operating in
 32 COLLINSON AND RUGMAN

many countries. There are other modes of doing IB such as exporting, licensing, and joint ven-
tures; but it is analysis of the MNE which drives the basic theory of IB. This is the internalization
theory as developed by Buckley and Casson (1976), Rugman (1981), and Hennart (1982).
The internalization theory explains why the MNE has unique and idiosyncratic firm-specific
advantages (FSAs) which allow it to overcome the liability of foreignness (LOF) in doing busi-
ness abroad. Essentially, the basic IB strategic decision is to recombine FSAs developed in
conjunction with the parent MNE home country CSAs with the host country CSAs that can
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be utilized by its subsidiaries.

In summary, the basic teaching of IB can be built around the CSA-FSA matrix first out-
lined in Rugman (1981) and now used as the central concept in the Rugman and Collinson
(2009) textbook, now in its 6th edition. The advantage of using this rich and powerful frame-
work is that the potential excessive breadth of topics relevant in IB can be matched by the
analytical depth available by using a rigorous theoretical tool. The teaching of IB thereby is
transformed from a catalogue of country factors into an interactive learning format where rele-
vant CSAs can be linked to FSAs. The basic FSA-CSA matrix can be modified to incorporate
major advances in thinking relevant to the teaching of IB. Following are three (non-exhaustive)
illustrations.
First, internalization theory and FSAs, which go back to Hymer (1960), are fully consistent
with the capabilities of the resource-based view (RBV) which appears to represent the dominant
logic in the field of strategic management. The manners in which FSAs interact with CSAs, and
evolve over time, have been discussed as dynamic capabilities in work summarized in Rugman
and Verbeke (2002). This has been applied in a Japanese context by Collinson and Rugman
(2008).
Second, the CSA axis of the matrix can incorporate thinking from the new institutional eco-
nomics. Country-level institutional factors can modify and extend the nature of CSAs. These
location (L) advantages can then be analyzed as they interact with FSAs. For example, firm inno-
vation and national science policy represent a classic integration of FSAs and CSAs. Another
example is how the Porter (1990) home country diamond, which is a summary of CSAs,
can be expanded into the Rugman and D’Cruz (1993) double diamond whereby host country
CSAs are recombined with FSAs. Verbeke (2009) builds upon Rugman and Verbeke (2001) in
demonstrating the nature of such MNE-led recombinations.
Third, the FSA-CSA framework continues to serve as a base for incorporating developments
in the thinking about internal organizational structures of the firm. For example, network anal-
ysis can be analysed as intra-firm linkages in which capabilities split between integration and
national responsiveness can be regarded as either non-location-bound FSAs (integration based) or
location-bound FSAs (national responsiveness based). This distinction was made by Rugman and
Verbeke (1992) and forms the building block linking MNE parent and subsidiary relationships
with network analysis.
Finally, there are inter-firm linkages which are relevant in supply chain analysis of outsourcing
and offshoring, and in related external linkages. Here, the flagship five partners framework of
Rugman and D’Cruz (2003), provides a parsimonious theoretical framework to analyze relational
contracts between MNEs and their key suppliers; key customers; infrastructure partners; and
potential collaborators.
 INTERNATIONAL BUSINESS TEACHING: CSA-FSA MATRIX 33

5. THE CSA-FSA FRAMEWORK—IN PRACTICE

Our illustration of how the CSA-FSA framework can be used in the classroom, linking the above
theory to real-work management questions, comes from a case study of the Kenya cut flower
industry (see the Appendix below).
Students are asked three questions in relation to the case. The first is to list the CSAs and
FSAs for Oserian and tests their conceptual understanding of the framework. Because a vari-
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ety of CSAs are described within the body of the case study, this is a relatively easy starting
point. Parallels can be drawn with Porter’s “Diamond of Advantage” framework as students
think through the location-specific advantages which enabled Oserian to competitively export
cut flowers to Europe, meeting the size, color, quality, and freshness standards demanded by
powerful retailers like Tesco. Links can also be made to the resource-based view (RBV) of the
firm in the discussion around what constitutes an FSA. FSAs are unique assets or capabilities that
are proprietary to the firm and would include particular flower seed varieties (developed genet-
ically or through plant breeding programs), greenhouse technologies, growing techniques, and
horticultural management capabilities.
The second two questions focus on real-world management decisions. First, what kinds of
FSAs would Oserian need to develop to move from Cell 1 to Cell 3 in the matrix; i.e., to interna-
tionalize? There are two dimensions to this—output or market-oriented internationalization and
input or resource-oriented internationalization—each with a specific set of possible FSAs. On
the one hand Oserian’s strategy may be to reduce its dependence on Tesco and increase its prof-
itability by selling directly to customers. Given the costs of developing a high-street presence in
the United Kingdom, students often suggest that the firm establishes a direct sales outlet online,
possibly through a partnership with an established platform like Amazon. A unique and attractive
brand is an obvious, important FSA and interesting discussions around leveraging the Fairtrade
brand directly can develop in the classroom.
Students often fail to discuss resource-oriented internationalization, which may be a necessary
strategic response to water shortages or political unrest in Kenya. Diversifying the range of loca-
tions in which its flowers are grown by investing in production facilities in Tanzania or further
afield might be a wise move for Oserian. The FSAs listed above would need to be combined with
a new set of CSAs to maintain or improve the firm’s current levels of export competitiveness, but
a new level of strategic flexibility would result. Occasionally, discussions about the main political
constraints faced by Oserian managers, including local corruption, develop out of this question.
Expertise relating to the handling of corrupt officials might be seen as an important FSA, for
example. These discussions can provide entry points into lessons on the institutional dimension
of the CSA-FSA framework.
Overall, this second question is important because it links management decisions on whether
or not to transform the firm into a multinational enterprise (MNE), to theories about the costs
and benefits of multinationality. There are obvious links to Dunning’s (1988) eclectic paradigm,
which distills theories on the advantages of ownership, location, and internalization (OLI).
Question 3 continues with this theme. It asks students whether, given the size of the cut-flower
market and the growing importance of Kenyan suppliers, Tesco should buy part or all of Oserian?
Answers should include reference to the nature of the retail supply chain, the power of Tesco in
the marketplace, and the fairly wide range of competitors to Oserian that provide alternative
sources of cut flowers. Most students understand that Tesco has no need to engage in foreign
direct investment (FDI) to maintain reliable supplies of high-quality, low-priced flowers for its
 34 COLLINSON AND RUGMAN

customers. It does not need to vertically integrate down the supply chain, or internationalize into
Kenya. This provides practical insights into Williamsonian transactions cost theory with specific
reasons why the market, rather than the organization hierarchy (internalization), is appropriate
for governing the Tesco-Oserian relationship. It also provides a good basis for discussing various
theories of the firm—including approaches associated with Penrose (1959), Chandler (1990), and
Prahalad and Hamel (1990). These essentially seek to understand why firms “do what they do.”
The question of where they do it lies at the heart of international business theory and practice.
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6. CONCLUSIONS

We have argued that the teaching of IB requires that the development of basic frameworks, such
as the CSA-FSA matrix, be linked to vivid real-world applications of such frameworks. Without
examples of IB relevance, students will not appreciate the long-term value of the basic frame-
works. In other words, IB teaching is all about combining rigor and relevance. For individual IB
teaching, working within the theoretical limits of a handful of basic frameworks, the key value
added in any class will be the enthusiasm and insight brought to the class by sets of new and inci-
sive real-world examples. The currency and relevance of the examples makes IB live and remain
a vibrant field of study.

SOURCES FOR THE OSERIAN CASE STUDY

Collinson, Chris, (2001), “The Business Costs of Ethical Supply Chain Management Report No. 2607,
Natural Resources and Ethical Trade Programme”, (United Kingdom: National Resources Institute; Kent,
UK), retrieved from http://www.nri.org/NRET/2607.pdf
Dolan, Catherine S., Steven Jafee, and Ronaldt Thoen, (2004), “Equatorial rose: The Kenyan-European cut
flower supply chain”, in Kopiki, Ronald (ed.), Supply Chain Development in Emerging Markets, (MIT
Press; Boston, MA).
Hennock, Mary, (2002, February 14), “Kenya’s flower farms flourish”, BBC News Online, retrieved from
http://news.bbc.co.uk/1/hi/business/1820515.stm
Muraya, Gathoni, (2007, March 28), “Local flower market quietly booming”, Business Day Africa, retrieved
from, http://www.businessdailyafrica.com
“Roses are red: Kenya’s flower industry”, (2008, February 7), The Economist.
Further material from the KFC at: http://www.kenyaflowercouncil.org; industry data from the Horticultural
Crop Development Authority (HCDA), Nairobi; and http://www.tesco.com/corporateinfo/,
http://www.oserian.com

AUTHOR BIOGRAPHIES

Simon C. Collinson is Professor of International Business and Innovation at Warwick Business

School (WBS) and sits on the Board of Directors of the Advanced Institute for Management
(AIM) research. He is also currently Guangbiao Chaired Professor at the School of Management,
Zhejiang University and visiting Professor at the Dunning Centre, Henley Business School
(Reading). Simon has held the posts of Deputy Dean and Associate Dean (MBAs) at WBS and
 INTERNATIONAL BUSINESS TEACHING: CSA-FSA MATRIX 35

was previously at the University of Edinburgh. His current research is on innovation and compet-
itiveness in emerging economies, with a particular focus on China. He has published in a range of
journals, including the Journal of International Business Studies and Organisation Studies and is
the co-editor of Images of the Multinational Firm (2009, Wiley/Blackwell) and co-author of the
FT Pearson / Prenticehalll International Business (2009) textbook, with Alan Rugman.
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Dr. Alan M. Rugman is Professor of International Business at the Henley Business School
of the University of Reading. He is the Director of Research in the School of Management.
Previously he held the L. Leslie Waters Chair of International Business at the Kelley School of
Business, Indiana University, 2001–2009. Dr. Rugman has published widely: his recent books
include: Inside the Multinationals, reissued by Palgrave Macmillan on its 25th Anniversary in
2006; The Regional Multinationals (Cambridge University Press, 2005) and Regional Aspects of
Multinationality and Performance (Elsevier, 2007). He has served as a consultant to major private
sector companies, research institutes, government agencies, and as an outside advisor on free
trade, foreign investment and international competitiveness to two Canadian Prime Ministers.
From 2004–2006, Mr. Rugman served as President of the Academy of International Business
(AIB). a.rugman@henley.reading.ac.uk

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Bartlett, Christopher A., and Sumantra Ghoshal, (1991), “Managing Across Borders: The Transnational Solution”,
(Harvard Business School Press; Cambridge, MA).
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New York, NY).
Chandler, Alfred D. Jr., (1990), “Scale and Scope”, (The Belknap Press of Harvard University; Cambridge, MA).
Collinson, Simon C., and Andrew M. Pettigrew, (2009), “Comparative international business research methods: Pitfalls
and practicalities”, in Rugman, Alan M.. (ed.), The Oxford Handbook of International Business (2nd ed.), (Oxford
University Press; Oxford, UK).
Collinson, Sims C. and Alan M. Rugman, (2008), “The regional nature of Japanese multinational business”, Journal of
International Business Studies (JIBS), 39 (2), 215–230.
Dunning, John H., (1988), “The eclectic paradigm of international production: A restatement and some possible
extensions”, Journal of International Business Studies 19 (1), 1–31.
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New York, NY).
 36 COLLINSON AND RUGMAN

Rugman, Alan M., and Simon C. Collinson, (2009), “International Business” (5th ed.), (FT Pearson/Prentice Hall:
Harlow, UK).
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 INTERNATIONAL BUSINESS TEACHING: CSA-FSA MATRIX 37

Appendix: From Oserian to Tesco—the Kenya Cut Flower Industry Case

Study
This is an “International Business Strategy in Action” case study from Rugman and
Collinson (2009) which describes the factors underlying the impressive growth of the Kenya
cut flowers industry in general and Oserian Development company in particular.
Following 15 years of industry growth, Kenya became the leading exporter of cut flowers
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to Europe in 2007, with 37% of the market. Flower exports earned US$600 million and
the industry employed about 70,000 people, and supported more than half a million people
in Kenya. Moreover, the average basic wage in the flower industry was around US$5,000
compared with Kenya’s average GDP per capita of US$400. This stimulated an economic
boom in the main flower growing areas of Naivasha, Thika, and Kiambu, where over 2,000
hectares were used for flower production.
The obvious question is: how did this new-found global competitive advantage come
about in one of the world’s least-developed countries? The case refers to a range of
country-specific advantages (CSAs), which include “lower-order” factor endowments and
“higher-order” endowments. Kenya has had the former for a long time—such as land, good
growing conditions, and cheap labor. But it is only with the development of the latter—
including investment capital, the availability of specific kinds of contractors and suppliers,
and the transportation system—that this mini industrial revolution has occurred. The trans-
port infrastructure which underpins the “cold supply chain” is very important because
time-to-market is critical to the quality of the end product and airfreight, marketing, handling
in Europe, and packaging make up 50% of all costs for Kenyan growers.
Oserian (“place of peace” in Maasai), one of the largest privately owned flower farms in
the world, has been central to the development of these higher order endowments. Operated
and partly owned by Hans and Peter Zwager, the company began growing flowers in the
early 1980s. It has over 200 hectares under cultivation (particularly with roses, spray carna-
tions, gypsophila, and chrysanthemums) next to Lake Naivasha in the Rift Valley and exports
over 300 million stems per year. The farm employs about 5,000 people; 85% are permanent
employees and over 60% live on the farm with their families. The facilities include three
kindergartens, two primary schools, shopping centers, social halls, and a medical center.
Oserian and other Kenya flower producers have benefited from the increase in direct sales
to European retailers—including Tesco, the United Kingdom’s number one food retailer and
the largest retailer of flowers and plants. The British spend more than $3 billion a year on
fresh cut flowers and indoor plants. By cutting out the Dutch auction houses, Tesco found
that it could work directly with growers to reduce prices and improve quality and also pass
on customer needs to more directly influence new developments.
In 2004 Tesco and Oserian deepened their long-standing buyer–supplier alliance by open-
ing a line of Fairtrade roses. These have been certified to comply with employment, social,
and environmental conditions laid down in the Fairtrade agreement. Tesco does not take
an additional profit, as 8% of the overall export price goes directly to the farms, allo-
cated by joint management and employee committees, to improve employee conditions. This
premium is worth up to $200,000 per year to the two farms involved.
The full case study can be found on pages 595–596 in Rugman and Collinson (2009). The
original sources are listed above.