Transaction cost determinants and advantage transferability's effect on international ownership strategy

Abstract

This research examines the complementary effect of transaction cost perspective and resource-based view on multinational enterprises' (MNEs) ownership strategies. Advantages may be location bounded, making certain advantages transferable and others non-transferable. Drawing on the concept of transferability of advantage, this study examines the advantage's location-boundedness and the effect of transaction cost on MNEs' ownership strategy. The empirical analysis combines survey data and secondary data from annual reports. The use of multiple sources avoids common method biases. Regression results show that both transaction cost perspective and location-boundedness of advantage greatly affect international ownership strategy. This study contributes to the literature by further examining this effect, thus allowing a better understanding of a firm's advantage. Firms can apply the findings to design an ownership strategy that considers both efficient and benefit lenses, fostering successful foreign investment.