The Governance of the Multinational Enterprise: Insights from Internalization Theory

The objectives of this paper are to outline the contribution of internalization theory to our understanding of the governance of the MNE, and to highlight aspects of the theory that we believe have received insufficient attention in the literature. In particular, we suggest two promising lines of future research. The first focuses on the internal transaction costs associated with the governance and organization of the activities within the MNE, and here we highlight the costs of information acquisition and transmission, the costs of coordination, and the costs of aligning the interests of different stakeholders within the MNE. The second addresses the implications of different assumptions about the risk propensity of the MNE.