Theories of Firms and the Emergence of Multinational Enterprises: The Organizational and Managerial Implications of Solving Transactional Problems Versus Creating Exchange Value

Teece (J Int Bus Stud 45(1):8–37, 2014) identifies two theories of the emergence of multinational enterprises (MNEs) - one that focuses on how MNEs solve transactional difficulties that can emerge in market exchanges and another that focuses on how MNEs facilitate economic value creation that is difficult to realize through market exchanges - and suggests that both theories are important in understanding MNE emergence. However, the organizational and managerial implications of these two theories are very different. MNEs that solve transactional difficulties are typically hierarchical in nature, where senior managers exercise managerial fiat to direct subordinates, firm boundaries are well defined, and subordinate behavior is monitored to minimize opportunism. MNEs that create economic value are typically less hierarchical, involve the creation of cooperative relations among stakeholders to facilitate co-specialized investments, have less well-defined boundaries, and reduce the threat of opportunism by ensuring that stakeholders gain more continuing in this exchange than other exchanges. The organizational and managerial implications of these two theories suggest that MNEs that form to both solve transactional difficulties and to create economic value will face difficult challenges trying to reconcile the organizational and management imperatives implied by these theories. This paper concludes by discussing how MNEs might address these organizational and managerial conflicts.