This paper sets forth a rationale for multinational enterprise within a transaction cost analytic framework. It is suggested that hedging is an unlikely strategy for multinationals, and that economies gained from the intermediate case of firm-specific/partially product-specific information links provides the rationale for multinational enterprise. Foreign location is necessary to exploit product-specific economies, while the multinational option internalizes and guards the non-product-specific informational content of overseas investment. © 1986.
|Number of pages
|Journal of Economic Behavior and Organization
|Published - Mar 1986