MULTINATIONAL ENTERPRISE: A REVIEW ARTICLE
| Published date | 01 August 1983 |
| Author | Neil M. Kay |
| Date | 01 August 1983 |
| DOI | http://doi.org/10.1111/j.1467-9485.1983.tb01023.x |
Scottish
JwM/of
Political
Economy.
Vol.
30,
No.
3.
November
1983
0
1983
Scottish
Economic
Society
Review
Section
MULTINATIONAL ENTERPRISE: A REVIEW
ARTICLE
NEIL
M.
KAY
Heriot-
Watt
University
A.
M.
RUGMAN
(ed.),
New
Theories
o/
the
Multinational Enterprise.
London, Croom
Helm,
1982,
pp.
276.
f
14.95.
A.
M.
RUGMAN,
Inside the Multinationals.
London, Croom Helm,
1981,
pp.
164.
f
11.95.
R.
E. CAW
Multinational Enterprise and
Economic Analysis.
London, Cambridge
University Press,
1982.
pp.
305. f7.50
(paperback).
J.
M.
DUNNING,
International Production and
the Multinational Enterprise.
London, Allen
and Unwin,
1981,
pp.
424. f20.00. f8.95
(paperback).
M.
GILMAN,
The Financing
of
Foreign Direct
Investment.
London, Frances Pinter,
1981,
pp.
159. f 13.50.
N.
HOOD and
S.
YOUNG,
Multinationals in
Retreat
:
The Scottish Experience.
Edinburgh,
The University Press,
1982,
pp.
189.
f
10.00
(paperback).
J.
M.
DUNNING
and
R.
D.
PEARCE,
The
World's
Largest Industrial Enterprise.
London, Gower,
1981,
pp.
164.
f27.50.
The theory of the
firm
has been the focus for a
number
of
developments in recent years, some
deserving of,
or
aspiring to, the status
of
revolutions. Unfortunately, usually after initial
theoretical innovations they have typically
failed
to
fulfil early promise. Imperfect com-
petition has stuttered to a halt, bogged down
by theoretical and empirical difficulties,
olo-
gopoly has been bedevilled by indeterminancy
and an embarrassment
of
models to choose
from, while managerial and behavioural
theory's permissiveness with respect to variety
of possible behaviour patterns and managerial
motives has inhibited
its
effectiveness.
It
is not surprising that neoclassical theory
has proved a fairly robust paradigm, absorbing
internal expansions ofits basic framework such
as
imperfect competition and oligopoly, and
resisting external attacks. Despite well-
documented weaknesses in the paradigm itself,
no
contender has proved powerful enough to
dislodge
it
from its territorial advantage as
conventional theory.
It is in this context that transaction cost
economics has developed in recent years.
At
the moment, the theoretical and empirical
analyses are too disparate and idiosyncratic for
the approach to be treated as a single coherent
theory
of
the
firm,
but what is noteworthy is the
extent to which transaction cost economics has
been
offered and applied
as
an alternative
to
neoclassical theory in a variety of areas in
industrial organisation. It is remarkable not
only because
of
the rapidity with which trans-
action cost economics has emerged as a major
new development in the last decade
or
so,
but
also because the foundation laid by Coase
(1937)
lay largely undisturbed
for
so
long.
As Williamson
(1980)
points out, the neglect
of transaction costs by neoclassical theory
is
a
serious omission. A number
of
studies' have
contributed to a
growing
awareness that in the
absence of transaction costs, market failure
problems such as monopoly, externality and
public goods may be dealt with by costless
contracting. Loasby
(1976)
has pointed out
that in the absence
of
transaction costs even
economies of scale may
be
exploited by atom-
istic markets
if
property rights to usage of
indivisibilities are unambiguously allocated. It
has become increasingly apparent that many
standard economic problems are inherently
transactional in nature.
It is a natural next step
to
re-interpret
traditional empirical issues in neoclassical
analysis
as
problems in transaction costs.
For
example, labour markets, vertical integration
and oligopoly are areas reassessed in a trans-
'See
especially
Cow
(1960).
Calabrcsi (1968).
Dcmsetz
(1968) and
Dablman
(1979).
304
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