JOURNAL ARTICLE | Strategic Management Journal | 9 | July 1988
Searching for a Dynamic Theory of the Multinational Enterprise : A Transaction Cost Model
This paper constructs a transaction cost model which provides an explanation for the transition between two distinct governance modes for serving a foreign market; a wholly owned subsidiary and licensing. The paper initially outlines a Single-period model of the factors that influence a firms choice of governance mode. The model is then extended, first to incorporate a temporal perspective and then a dynamic perspective. The completed model identifies organisational and environmental contingencies which shape dynamic multi-period decision-making for the choice of governance mode.