Critical assessment of Transaction Cost Economics and Resource Based View theories in terms of their usefulness in explaining firms’ internationalization strategies.
Critical assessment of Transaction Cost Economics and Resource Based View theories in terms of their usefulness in explaining firms’ internationalization strategies.
Two Nobel Prize winners have extensively contributed to one of the theories that will be discussed in this essay. It is very exciting to access Transaction Cost Economics and Resource Based View theories in terms of their usefulness in explaining firms’ internationalisation strategies. This assessment will be based on two American companies: Harley Davidson-motorcycle manufacturer operating internationally and Wal-Mart - multinational Retail Corporation.
First of all, The beginnings of TCE- Transaction Costs Economics Theory is associated with British economist Ronald Coase, who used the term Transaction cost excessively to explain why firms to accomplish a number of tasks use in House capabilities and for the other part use external providers-market. A good illustration is when internal Transaction costs go up the firm is more likely to outsource and vice versa if external Transaction costs exceed Internal then firm should perform these tasks in House. Ronald Coase received a Nobel Prize "for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy" (Nobelprize.org 2013).The other key contributor to TCE Theory is a great American economist also a Nobel Prize winner for contributing to economic sciences - Oliver E. Williamson. The Theory has been developed to great lengths since 1930s and today Transaction Cost Theory is not only used to explain Mechanisms of Governance in the home market, but to analyze the structure of the firm that should be used in foreign markets to manage risks and reap better results from international operations. Such structures are: a) Markets; b) Hybrids c) Hierarchies. Those structures are regarded as a) structure having the least control over firms’ international
Two Nobel Prize winners have extensively contributed to one of the theories that will be discussed in this essay. It is very exciting to access Transaction Cost Economics and Resource Based View theories in terms of their usefulness in explaining firms’ internationalisation strategies. This assessment will be based on two American companies: Harley Davidson-motorcycle manufacturer operating internationally and Wal-Mart - multinational Retail Corporation.
First of all, The beginnings of TCE- Transaction Costs Economics Theory is associated with British economist Ronald Coase, who used the term Transaction cost excessively to explain why firms to accomplish a number of tasks use in House capabilities and for the other part use external providers-market. A good illustration is when internal Transaction costs go up the firm is more likely to outsource and vice versa if external Transaction costs exceed Internal then firm should perform these tasks in House. Ronald Coase received a Nobel Prize "for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy" (Nobelprize.org 2013).The other key contributor to TCE Theory is a great American economist also a Nobel Prize winner for contributing to economic sciences - Oliver E. Williamson. The Theory has been developed to great lengths since 1930s and today Transaction Cost Theory is not only used to explain Mechanisms of Governance in the home market, but to analyze the structure of the firm that should be used in foreign markets to manage risks and reap better results from international operations. Such structures are: a) Markets; b) Hybrids c) Hierarchies. Those structures are regarded as a) structure having the least control over firms’ international
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