Skip to main content Accessibility help
×
Hostname: page-component-7c8c6479df-27gpq Total loading time: 0 Render date: 2024-03-28T11:47:37.403Z Has data issue: false hasContentIssue false

3 - Organization and Growth of the MNE

Published online by Cambridge University Press:  18 December 2009

Richard E. Caves
Affiliation:
Harvard University, Massachusetts
Get access

Summary

Economic analysis traditionally has treated the firm as a single decision-making center, as if one mind were absorbing all relevant data and making all decisions on the basis of well-formulated objectives. In fact, decision making is decentralized within firms, and the decisions reached can be colored by the structure of internal organization chosen by the firm and the incentives and resources that it provides to its various groups of functional specialists. This coloration arises from precisely the costs of information and transactions discussed in Chapter 1. The multinational enterprise (MNE) enjoys certain advantages over the arm's-length market, but they must trade against the organizational costs and constraints that the firm encounters in coordinating multinational operations. Therefore, an examination of the MNE's internal structure is a logical extension of the transaction-cost model of the MNE's underlying rationale. This should aid understanding of how the firm will respond to both market stimuli and public policies.

Expansion of the Firm

An apt starting point is the process of the growth of the firm, as it pertains to the MNE. We can link the transaction-cost model of the MNE to constraints on the firm's process of growth and adjustment and to evidence on riskiness and turnover in multinational activities.

Adjustment Costs in Expansion of the MNE

The transaction-cost approach to the MNE can explain the course of the firm's development over time, as well as its pattern of activities at a given time.

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×