The Theory of the Firm, the Theory of Competition and the Transnational Corporation
se’s 1937 paper on “The Nature of the Firm” formed the basis of the transaction-cost and internalization theories of transnational enterprises in the 1970s-1990s. These emphasized the problem of firms transferring intangible assets across national borders. Newer theories of the firm adopt resourcebased Penrosian, knowledge-based, capabilities and evolutionary perspectives, yet most continue to explain the international firm as a function of transaction-cost economizing. It is argued that Coase’s intention was to present a theory of the firm abstracted from its competitive environment. The application of this approach to a theory of the TNC is flawed because it cannot explain the TNC without reference to competitive conditions. This leaves us with incomplete theories of multinational firms in their competitive environments, because they address transactioncost problems and solutions to the exclusion of many other competitive considerations that must influence the transnational step in the firm’s evolution. The newer knowledge-based theories of the firm represent progress because they focus on the institutional details of dynamic firm creation of (investment in) the intangible or knowledge-based competitive assets by which firms transform their environments. For international firms, this has global consequences. Most recently, theory has begun to emphasize the advantages and not just the costs of internationalization. Additionally, the necessity to address the juxtaposition of internalization and externalization by global firms provides a context for creating a dynamic explanation of both. The key is to recognize the process of standardization as a part of the process of innovation at the heart of learningbased theories. This can help to explain the hierarchical division of labor both within and between firms.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://economics.umb.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hymer, Stephen, 1970. "The Efficiency (Contradictions) of Multinational Corporations," American Economic Review, American Economic Association, vol. 60(2), pages 441-48, May.
- Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
- Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 171-195, Summer.
- Pitelis, Christos N., 2004. "Edith Penrose and the resource-based view of (international) business strategy," International Business Review, Elsevier, vol. 13(4), pages 523-532, August.
- Peter J Buckley & Niron Hashai, 2004. "A global system view of firm boundaries," Journal of International Business Studies, Palgrave Macmillan, vol. 35(1), pages 33-45, January.
- Mutinelli, Marco & Piscitello, Lucia, 1998. "The entry mode choice of MNEs: an evolutionary approach," Research Policy, Elsevier, vol. 27(5), pages 491-506, September.
- Huascar Pessali & Ramon Fernandez, 2005.
"Institutional Economics at the Micro Level? What Transaction Costs Theory Could Listen From Original Institutionalism (In the Spirit of Building Bridges),"
Method and Hist of Econ Thought
- Huascar Pessali & Ramon Fernandez, 2005. "Institutional Economics at the Micro Level? What Transaction Costs Theory Could Listen From Original Institutionalism (In the Spirit of Building Bridges)," Industrial Organization 0511006, EconWPA.
- Porter, Michael E, 1979. "The Structure within Industries and Companies' Performance," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 214-27, May.
- Schmalensee, Richard, 1985.
"Do Markets Differ Much?,"
American Economic Review,
American Economic Association, vol. 75(3), pages 341-51, June.
- Janis Kapler, 1997. "The Theory of Transnational Firms: an empirical reassessment," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(2), pages 195-211.
- Hodgson, Geoffrey M., 1998. "Competence and contract in the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 35(2), pages 179-201, April.
- Horstmann, Ignatius J & Markusen, James R, 1989. "Firm-Specific Assets and the Gains from Direct Foreign Investment," Economica, London School of Economics and Political Science, vol. 56(221), pages 41-48, February.
- Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
- Williamson, Oliver E, 1981. "The Modern Corporation: Origins, Evolution, Attributes," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1537-68, December.
- Richard N. Langlois, 2002.
"The Vanishing Hand: the Changing Dynamics of Industrial Capitalism,"
2002-21, University of Connecticut, Department of Economics.
- Richard N. Langlois, 2003. "The vanishing hand: the changing dynamics of industrial capitalism," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 351-385, April.
- Richard N. Langlois, 2001. "The Vanishing Hand: the Changing Dynamics of Industrial Capitalism," Economic History 0110001, EconWPA.
- C. Paul Hallwood, 1997. "The Transaction Cost Theory of the (Multinational) Firm - Reply," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 683-, December.
- Belussi, Fiorenza & Arcangeli, Fabio, 1998. "A typology of networks: flexible and evolutionary firms," Research Policy, Elsevier, vol. 27(4), pages 415-428, August.
- Pierre Azoulay, 2004. "Capturing Knowledge within and across Firm Boundaries: Evidence from Clinical Development," American Economic Review, American Economic Association, vol. 94(5), pages 1591-1612, December.
- William MILBERG, 2004. "The changing structure of trade linked to global production systems: What are the policy implications?," International Labour Review, International Labour Organization, vol. 143(1-2), pages 45-90, 03.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- B Kogut & U Zander, 2003. "A memoir and reflection: knowledge and an evolutionary theory of the multinational firm 10 years later," Journal of International Business Studies, Palgrave Macmillan, vol. 34(6), pages 505-515, November.
When requesting a correction, please mention this item's handle: RePEc:mab:wpaper:6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Arjun Jayadev)
If references are entirely missing, you can add them using this form.