The boundaries of the firm in global strategy

• DOI: http://doi.org/10.1002/gsj.1208
• Author: Torben Pedersen,Alvaro Cuervo‐Cazurra,Ram Mudambi
• Date: 01 May 2018
• Published date: 01 May 2018

INTRODUCTION

The boundaries of the firm in global strategy

Alvaro Cuervo-Cazurra

1

| Ram Mudambi

2

| Torben Pedersen

3

1

International Business and Strategy Group,

Northeastern University, Boston, Massachusetts

2

Strategic Management, Temple University,

Philadelphia, Pennsylvania

3

Department of Management and Technology,

Bocconi University, Milan, Italy

Correspondence

Torben Pedersen, Via Roberto Sarfatti, 25, 20100

Milano MI, Italy.

Email: torben.pedersen@unibocconi.it

Research summary: We briefly review the evolution in

the analysis of the boundaries of the firm in global strat-

egy. We explain how initial studies that argued that firm

boundaries were driven by the minimization of transaction

costs were later complemented by analyses that proposed

that firm boundaries were driven by the development and

use of resources to maximize value creation and capture.

Studies of global strategy combine these two approaches

and introduce the influence of location—both the home

and host countries—as a third influence on boundary deci-

sions. We encourage future studies to focus more deeply

on the complexity, dynamics, and mechanisms of three

themes: the consideration of all boundary options, the

study of the entirety of the multinational, and the simulta-

neous consideration analysis of the characteristics of all

the locations in which the multinational is active. These

suggestions help better connect the three drivers of firm

boundaries: transactions, resources, and locations.

Managerial summary: We briefly review the evolution in

academic thinking regarding the scope of activities of a

firm, that is, a firm's boundaries, in global strategy. We

explain how initial studies that argued that firm boundaries

are driven by a desire to reduce costs were complemented

by analyses that proposed that firm boundaries are driven

by a desire to increase value creation and capture. Studies

of global strategy combine these two drivers and introduce

the influence of the location of operation—the home and

host countries—as a third influence on boundary decisions.

We provide suggestions for future studies on how to incor-

porate the complexity, dynamics, and mechanisms of the

complete array of methods to manage boundaries, the com-

plete set of subsidiaries of the multinational, and the com-

plete set of characteristics of the relevant locations.

Received: 23 March 2018 Accepted: 23 March 2018

DOI: 10.1002/gsj.1208

Copyright © 2018 Strategic Management Society

Global Strategy Journal. 2018;8:211–219. wileyonlinelibrary.com/journal/gsj 211