Towards a Theory of Regional Multinationals: A Transaction Cost Economics Approach

Zusammenfassung

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This paper develops new theory to help explain the recent empirical work that demonstrates the profound lack of global sales, with 320 of the 380 largest firms in the world averaging 80% of their sales within their home region. Transaction cost economics (TCE) concepts are used to explain why large firms adopt regional, rather than global, strategies. Internationalization is a well-understood concept at the macro-level: it refers to the increasing economic interdependence among nations, as a result of liberalized, and technologically facilitated, economic exchange of capital, raw materials, intermediate goods (including knowledge), human resources, manufactured end products, and services. The author observes substantial divergence of environmental reporting practices across the triad, which means that local institutions matter, even for the largest MNEs, and that additional linking investments need to be performed in this area, if a firm wishes to benefit from the same TCE reducing effects in the host regions, as compared to those achieved in the home region.

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Auszug

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Towards a Theory of Regional Multinationals: A Transaction Cost Economics Approach

Introduction

Internationalization is a well-understood concept at the macro-level: it refers to the increasing economic interdependence among nations, as a result of liberalized, and technologically facilitated, economic exchange of capital, raw materials, intermediate goods (including knowledge), human resources, manufactured end products, and services. Such interdependence is shown in country-level balance of trade and investment data, at an aggregated level (i.e., overall trade and investment stocks and flows, across all countries), Rugman (2000). Unfortunately, in the past two decades, many authors from academia and the public policy sphere have made a conceptual quantum leap, equating internationalization with globalization, i.e., the idea that the world is a fully integrated market place.

The problem with such a perspective on globalization is that it assumes away the necessity of selectivity in internationalization. Such selectivity is some extent introduced at the macro-level, for example when countries decide to engage in regional trade and investment agreements, such as the North American Free Trade Agreement (NAFTA) and the European Union (EU) see below. More importantly, selectivity in internationalization is mainly a firm-driven phenomenon. Firm-level selectivity in internationalization is the key issue addressed in this article, and the relevance of the transaction cost economics approach (TCE) suggested here, is demonstrated by briefly re-interpreting the fin...

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