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Towards a Theory of Regional Multinationals: A Transaction Cost Economics Approach

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  • Alan M. Rugman

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Alain Verbeke

    (University of Calgary, Faculty of Management)

Abstract

This paper develops new theory to help explain the recent empirical work that demonstrates the profound lack of global sales, with 320 of the 380 largest firms in the world averaging 80% of their sales within their home region. Transaction cost economics (TCE) concepts are used to explain why large firms adopt regional, rather than global, strategies. A new theory of international management built to explain regional-level strategy and structure is developed. In this, a firm's geographic scope of sales is limited by the predominant regional reach of its firm level capabilities, due to TCE reasons.

Suggested Citation

  • Alan M. Rugman & Alain Verbeke, 2005. "Towards a Theory of Regional Multinationals: A Transaction Cost Economics Approach," Working Papers 2005-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2005-04
    as

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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2005-04-rugman-verbeke.pdf
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    References listed on IDEAS

    as
    1. Alan M. Rugman & Alain Verbeke, 2005. "Extending the Theory of the Multinational Enterprise: Internalization and Strategic Management Perspectives," Chapters, in: Analysis of Multinational Strategic Management, chapter 7, pages 91-103, Edward Elgar Publishing.
    2. Alan M. Rugman & Alain Verbeke, 2005. "A Perspective on Regional and Global Strategies of Multinational Enterprises," Chapters, in: Analysis of Multinational Strategic Management, chapter 8, pages 104-119, Edward Elgar Publishing.
    3. Douglass C. North, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter.
    4. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
    5. Alan M. Rugman & Alain Verbeke, 2005. "Multinational Enterprises and Public Policy," Chapters, in: Analysis of Multinational Strategic Management, chapter 24, pages 413-434, Edward Elgar Publishing.
    6. Alan M. Rugman & Alain Verbeke, 2005. "A Note on the Transnational Solution and the Transaction Cost Theory of Multinational Strategic Management," Chapters, in: Analysis of Multinational Strategic Management, chapter 2, pages 16-26, Edward Elgar Publishing.
    7. William M. Dugger, 1996. "The Mechanisms of Governance," Journal of Economic Issues, Taylor & Francis Journals, vol. 30(4), pages 1212-1216, December.
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