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Knowledge, Market Failure and the Multinational Enterprise: A Theoretical Note


  • James H Love

    (University of Strathclyde)


This article offers a critique and extension of recent work by Bruce Kogut and Udo Zander. Kogut and Zander are correct to argue that opportunism is unnecessary to explain the existence of the multinational, but wrong to infer that this indicates an absence of market failure. They have identified an important class of transaction costs and market failure which arises in the absence of opportunism, but do not cat doubt on the market failure approach to the theory of the multinational. Their argument that they have identified an important source of ‘ownership’ advantage is unconvincing and is not supported by the empirical evidence. However, Kogut and Zander's work is of considerable significance, but in areas different from those that they highlight.© 1995 JIBS. Journal of International Business Studies (1995) 26, 399–407

Suggested Citation

  • James H Love, 1995. "Knowledge, Market Failure and the Multinational Enterprise: A Theoretical Note," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(2), pages 399-407, June.
  • Handle: RePEc:pal:jintbs:v:26:y:1995:i:2:p:399-407

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    Cited by:

    1. Sakakibara, Mariko & Serwin, Kenneth, 2000. "U.S. Distribution Entry Strategy of Japanese Manufacturing Firms: The Role of Keiretsu," Journal of the Japanese and International Economies, Elsevier, vol. 14(1), pages 43-72, March.
    2. Moon, Hwy-Chang & Roehl, Thomas W., 2001. "Unconventional foreign direct investment and the imbalance theory," International Business Review, Elsevier, vol. 10(2), pages 197-215, April.
    3. Verbeke, Alain & Kano, Liena & Yuan, Wenlong, 2016. "Inside the regional multinationals: A new value chain perspective on subsidiary capabilities," International Business Review, Elsevier, vol. 25(3), pages 785-793.

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