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Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals Before 1939

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  • Nicholas, Stephen

Abstract

This paper analyzes the transition from agents to branch selling as alternative institutional modes for transacting abroad by pre-1939 British manufacturing multinationals. A model to explain the shift between alternative modes is specified in terms of transaction costs. Agent opportunism and contract monitoring costs are the major transaction costs. Besides transaction costs, the frequency of transactions and the accumulation of market-specific knowledge by the principal were found to be important variables.

Suggested Citation

  • Nicholas, Stephen, 1983. "Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals Before 1939," The Journal of Economic History, Cambridge University Press, vol. 43(3), pages 675-686, September.
    • Handle: RePEc:cup:jechis:v:43:y:1983:i:03:p:675-686_03
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    Cited by:

    1. Ignatius J. Horstmann & James R. Markusen, 2018. "Learning to sell in new markets: A preliminary analysis of market entry by a multinational firm," Review of International Economics, Wiley Blackwell, vol. 26(5), pages 1040-1052, November.
    2. Swoboda, Bernhard & Olejnik, Edith & Morschett, Dirk, 2011. "Changes in foreign operation modes: Stimuli for increases versus reductions," International Business Review, Elsevier, vol. 20(5), pages 578-590, October.
    3. Wilfred J. Ethier & James R. Markusen, 2021. "Multinational firms, technology diffusion and trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 7, pages 131-158, World Scientific Publishing Co. Pte. Ltd..
    4. José Campa & Mauro F. Guillén, 1999. "The Internalization of Exports: Firm- and Location-Specific Factors in a Middle-Income Country," Management Science, INFORMS, vol. 45(11), pages 1463-1478, November.
    5. 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.
    6. Hennart, Jean-François, 2010. "Transaction Cost Theory and International Business," Journal of Retailing, Elsevier, vol. 86(3), pages 257-269.

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