Comment on Hashai and Buckley: Transactions Costs, Capabilities, and Corporate Advantage Considerations in Theories of the Multinational Enterprise

• Published date: 01 February 2014
• Author: Jay B. Barney,Margaret A. Peteraf
• Date: 01 February 2014
• DOI: http://doi.org/10.1111/j.2042-5805.2013.01067.x

COMMENTARY

COMMENT ON HASHAI AND BUCKLEY:

TRANSACTIONS COSTS, CAPABILITIES, AND

CORPORATE ADVANTAGE CONSIDERATIONS IN

THEORIES OF THE MULTINATIONAL ENTERPRISE

JAY B. BARNEY1and MARGARET A. PETERAF2*

1Eccles School of Business, University of Utah, Salt Lake City, Utah, U.S.A.

2Tuck School of Business, Dartmouth College, Hanover, New Hampshire,

U.S.A.

Hashai and Buckley’s (2014, this issue) article boldly

challenges some of the most widely held views in the

international business literature regarding the emer-

gence of the multinational enterprise. While their

ideas clearly deserve deep consideration and a

thoughtful, thorough response, this forum does not

offer us an opportunity to respond fully. To do

so would require a complete theory of governance,

at least with respect to international expansion.

Accordingly, we limit our comments to two related

issues.

TRANSACTIONS COSTS

VERSUS CAPABILITIES

The first has to do with the relationship between

transactions cost-based and capabilities-based expla-

nations of the existence of the firm, and especially the

MNE firm. While adopting a general equilibrium

modeling approach, Hashai and Buckley (2014,

this issue) motivate their work with the following

observation:

‘. . . as much as firms do not need a competitive

advantage to exist (they just need be more efficient

than arm’s-lengths market transactions), they do not

need a competitive advantage to become MNEs.’

This assertion is consistent with much transac-

tions cost reasoning, where transactions costs are

seen as both a necessary and sufficient condition for

the emergence of hierarchical governance, i.e., the

firm (Williamson, 1975, 1985).

However,other scholars have begun to examine the

link between capabilities and firm emergence

(Barney, 1999; Conner and Prahalad, 1996). These

authors have concluded that if one assumes away

differences between the capabilities of firms, then the

traditional TCE conclusion—that transactions cost

are both a necessary and sufficient explanation of the

emergence of firms—holds. Still, if one recognizes

that capabilities are typically heterogeneously dis-

tributed across firms, and especially if this heteroge-

neity is relatively stable across time, then transactions

cost explanations of firm emergence—while still nec-

essary—are no longer sufficient.

Consider the following example: to remain true to

the theme of the Hashai and Buckley (2014, this

issue) article, we choose a global strategy example.

Suppose a Chinese manufacturing firm wishes to sell

its products to U.S. customers. According to tradi-

tional TCE logic, it has three options for doing so: (1)

Keywords: multinational enterprise; transaction costs; capabili-

ties; competitive advantage; corporate advantage

*Correspondence to: Margaret A. Peteraf,Tuck School of Busi-

ness, Dartmouth University, 100 Tuck Hall, Hanover, N.H.

03755, U.S.A. E-mail: margaret.a.peteraf@tuck.dartmouth.edu

Global Strategy Journal

Global Strat. J., 4: 70–73 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1111/j.2042-5805.2013.01067.x

Copyright © 2014 Strategic Management Society