Transaction Costs and the Internationalisation of Business Franchising

S.O. Monye ()
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S.O. Monye: South Bank University Business School, http://www.sbu.ac.uk

No 1-97, CIBS Research Papers in International Business from London South Bank University CIBS

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.

Keywords: transaction; costs; and; business; franchising (search for similar items in EconPapers)
Pages: 27 pages
Date: 1997
New Economics Papers: this item is included in nep-fin and nep-ind
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