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Transaction Costs and the Internationalisation of Business Franchising

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Abstract

The assumption in the theory of international production is that direct foreign investment offers the best alternative for exercising effective control over foreign operations. This is based on the belief that, by externalising company-specific advantages, firms will be unable to efficiently constrain the behaviour of the other parties, and will therefore incur high transaction costs. This paper argues that the costs of overseas operation may be higher in direct foreign investment than in franchising and that the latter is a form of organisation in which arms-length associates can be effectively monitored and controlled without the need for substantial direct investment.

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  • S.O. Monye, 1997. "Transaction Costs and the Internationalisation of Business Franchising," CIBS Research Papers in International Business 1-97, London South Bank University CIBS.
    • Handle: RePEc:sbu:cibswp:1-97
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    transaction costs and business franchising;

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