Transaction costs economics, knowledge transfer and universal ethical business norms in multinational enterprises Online publication date: Wed, 06-Oct-2010
by Paul M. Vaaler, Norman Bowie
International Journal of Strategic Change Management (IJSCM), Vol. 2, No. 4, 2010
Abstract: We use Transaction Costs Economics (TCE) theory to explain why 'knowledge-intensive' MNEs are more likely to employ universal ethical business norms in all countries where it operates. In TCE terms, transferring people and embedded ideas requires substantial asset-specific investments most efficiently governed in an MNE hierarchy. We extend TCE reasoning to show that: (a) when such transfers are frequent, they are likely to be governed in an MNE with standardised norms; (b) when the host-country destination of such transfers is uncertain ex ante, they are likely to be governed with a standardised and proprietary MNE norms not necessarily consistent either with the MNE's home or host country. We conjecture about the substance of such norms, including: (a) non-discrimination; (b) honesty and transparency; (c) self-control and fairness. We integrate international business and ethics perspectives on business norms in MNEs reliant on adroit knowledge management to compete globally.
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