Agl Outsourcing It to Tata Consultancy Services: a Kogut and Zander’s Perspective

AGL Outsourcing IT To Tata Consultancy Services:
A Kogut and Zander’s Perspective

M.Sc. International Business and Management
Economic Analysis of The Multinational Enterprise (BMAN70191)
Student ID Number: 8515642
Word Count: 3,276

1. INTRODUCTION
The issues that have been explored in the following essay lie at the core of the evolutionary theory of the Multi National Enterprise (MNE) given by Kogut and Zander (1992). According to Kogut and Zander (2003), firms define a community consisting of a body of knowledge, which guides the cooperation and communication within the community. Boundaries of a firm are not defined by market transaction costs and market failures to protect knowledge, but it is the better ability of firms than the markets to transfer the social knowledge of individuals and groups within an organisation, which reflects its boundaries (Kogut and Zander, 1992). Boundaries reveal the extent of growth of a firm across its national borders either through internationalisation or through external contractual relationships (Ietto-Gillies, 2012). Thus it is not market failure but the relative efficiency of a firm in transferring knowledge, which guides its boundaries. Firms act as social communities and grow through the replication of current knowledge that facilitates the innovation of new knowledge (Kogut and Zander, 1993). Cooperation within the groups and individuals leads to learning and growth of capabilities in the social community. The above highlights a Kogut and Zander’s perspective to why a firm exists and how it grows across borders.
This essay explains the case of AGL outsourcing its IT services to Tata Consultancy Services Limited (TCS) in line with the evolutionary theory. AGL is Australia’s largest energy retailer as well as the largest private owner, operator and developer of renewable energy assets with 3.2 million customers across Australia. The company is not only engaged in purchase and sale of electricity but also in

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