Towards a theory of multinational enterprise |
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Affiliation: | 1. Department of Pharmaceutical & Biological Engineering, School of Chemical Engineering, Sichuan University, Chengdu 610065, PR China;2. School of Chemical and Biomedical Engineering, Nanyang Technological University, 62 Nanyang Drive, Singapore 637459, Singapore |
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Abstract: | This paper sets forth a rationale for multinational enterprise within a transaction cost analytic framework. It is suggested that hedging is an unlikely strategy for multinationals, and that economies gained from the intermediate case of firm-specific/partially product-specific information links provides the rationale for multinational enterprise. Foreign location is necessary to exploit product-specific economies, while the multinational option internalizes and guards the non-product-specific informational content of overseas investment. |
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