Searching for a dynamic theory of the multinational enterprise: A transaction cost model

Charles W. L. Hill and W. Chan Kim

Strategic Management Journal, 1988, vol. 9, issue S1, 93-104

Abstract: This paper constructs a transaction cost model that provides an explanation for the transition between two distinct governance modes for serving a foreign market; a wholly owned subsidiary and licensing. The paper initially outlines a single‐period model of the factors that influence a firm's choice of governance mode. The model is then extended, first to incorporate a temporal perspective and then a dynamic perspective. The completed model identifies organizational and environmental contingencies that shape dynamic multi‐period decision‐making for the choice of governance mode.

Date: 1988
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