Title: Transaction costs economics, knowledge transfer and universal ethical business norms in multinational enterprises

Authors: Paul M. Vaaler, Norman Bowie

Addresses: Department of Strategic Management & Organization, Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, MN 55455, USA. ' Department of Strategic Management & Organization, Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, MN 55455, USA

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.

Keywords: knowledge transfer; business ethics; transaction costs economics; multinational enterprises; MNEs; ethical norms; knowledge intensiveness; employee transfers; embedded ideas; asset specific investments; standardised norms; host countries; proprietary norms; non-discrimination; honesty; transparency; self-control; fairness; business norms; KM; knowledge management; global competiveness; strategic change management; knowledge governance.

DOI: 10.1504/IJSCM.2010.035847

International Journal of Strategic Change Management, 2010 Vol.2 No.4, pp.269 - 297

Available online: 06 Oct 2010 *

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