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

Online publication date: Wed, 06-Oct-2010

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