Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals Before 1939

1983 ◽  
Vol 43 (3) ◽  
pp. 675-686 ◽  
Author(s):  
Stephen Nicholas
Keyword(s):  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Direct Investment ◽  
Specific Knowledge ◽  
Monitoring Costs

This paper analyzes the transition from agents to branch selling as alternative institutional modes for transacting abroad by pre-1939 British manufacturing multinationals. A model to explain the shift between alternative modes is specified in terms of transaction costs. Agent opportunism and contract monitoring costs are the major transaction costs. Besides transaction costs, the frequency of transactions and the accumulation of market-specific knowledge by the principal were found to be important variables.

scholarly journals Resolving Conflict between Parties and Consequences for Foreign Direct Investment: The Repsol-YPF Case in Argentina

2019 ◽  
Vol 11 (21) ◽  
pp. 6012 ◽  
Author(s):  
Raquel Fernández González ◽  
María Elena Arce Fariña ◽  
María Dolores Garza Gil
Keyword(s):  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Institutional Framework ◽  
Judicial Process ◽  
Institutional Economic ◽  
Long Duration ◽  
Judicial Procedure ◽  
The Impact

In 2012, the Argentine government expropriated 51% of the shares of Yacimientos Petrolíferos Fiscales S.A. (YPF) from the Spanish company Repsol S.A. The YPF was nationalized without prior compensation, violating Argentina’s own laws and, consequently, the institutional framework in force in the country. As a consequence, the country’s reputation deteriorated and, although there were several contacts with multinational enterprises to become YPF’s new partner, the investment climate was affected, making it really difficult to attract Foreign Direct Investment (FDI). In order to attract these investments after the expropriation, the Argentine government understands that it is necessary to settle the legal proceedings with Repsol. In order to avoid an imperfect judicial procedure of long duration and with high transaction costs, both parties reached a settlement agreement. This paper presents an institutional economic analysis of expropriation, contextualizing it within the Argentine institutional framework and studying the trajectory of the nationalization of YPF. In this way, it seeks to contextualize institutionally the Argentine government’s decision and the impact it has had on both the FDI and the credibility of the country’s institutional framework. It also analyzes how the resolution of the conflict occurs through an agreement between the parties that avoids the judicial process, given its high transaction costs.

Globalization, Development, and History in the Work of Edith Penrose

2011 ◽  
Vol 85 (1) ◽  
pp. 65-84 ◽  
Author(s):  
Christos N. Pitelis
Keyword(s):  
Political Economy ◽  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Direct Investment ◽  
Multinational Enterprise ◽  
The State ◽  
Fiftieth Anniversary ◽  
Business History ◽  
The Political ◽  
Edith Penrose

Edith Penrose's work on the multinational enterprise and the political economy of globalization and development is assessed as it relates to her views on business history. This essay was written on the occasion of the fiftieth anniversary of Penrose's classic 1959 book and her 1960 prize-winning paper on Hercules Powder, which was published in the Review. Penrose came close to providing a theory of “internalization,” compared foreign direct investment to market-type contracting relations, and even discussed transaction costs–related arguments. However, she largely accepted the existence of fi rms and did not examine why firms exist vis-à-vis alternatives, such as markets. Her views on the political economy of globalization, relations between multinational enterprise and the state, and development have proved to be incisive, mostly accurate, and ahead of their time.

The Influence of Industrial Relations Factors on U.S. Foreign Direct Investment Abroad

ILR Review ◽  
1997 ◽  
Vol 51 (1) ◽  
pp. 3-17 ◽  
Author(s):  
William N. Cooke
Keyword(s):  
Decision Making ◽  
Foreign Direct Investment ◽  
Collective Bargaining ◽  
Transaction Costs ◽  
Direct Investment ◽  
Investment Decision ◽  
Industrial Relations ◽  
Multinational Companies ◽  
Labor Practices ◽  
Investment Decision Making

Although managers of multinational companies have identified labor practices and regulations, access to skilled labor, and similar factors as important considerations in foreign direct investment decision-making, few studies have empirically examined the influence of industrial relations factors on foreign direct investment. Applying a transaction costs framework to U.S. Department of Commerce data published in 1992, the author examines the influence of several key industrial relations variables on U.S. foreign direct investment across nine industries and nineteen OECD-member countries. Across the countries studied, U.S. foreign direct investment was negatively affected by the presence of high levels of union penetration, centralized collective bargaining structures, stiff government restrictions on layoffs, and pervasive contract extension policies; it was positively affected by high levels of education and policies requiring works councils.

Economic Partnership Agreement Mexico-Japan and Its Impact on Foreign Direct Investment

2018 ◽  
pp. 274-294
Author(s):  
José G. Vargas-Hernández
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Direct Investment ◽  
The Other ◽  
Manufacturing Companies ◽  
Economic Partnership Agreement ◽  
Economic Partnership ◽  
Partnership Agreement ◽  
Japanese Companies

This chapter is intended to analyze the advantages to associate with a developing country like México from the perspective of the theories of the Agency, Institutional, Resource-based Theory and the Theory of Transaction Costs. Generally, FDI contributes to capital formation, expansion and diversification of exports, increasing competition, provide access to top technology and improving management systems. Mexico is of the largest FDI recipients within the developing countries. Japan, on the other hand, is one of the largest sources of FDI worldwide, and is gaining a larger share in the Mexican FDI context since the onset of the Economic Partnership Agreement. In this paper, factors that might lead to the depletion of productive spillovers from Japanese manufacturing companies are reviewed from a qualitative perspective. The analysis suggests that inefficiencies in endogenous companies; and Japanese companies being part of firm networks (keiretsu), might lead to productive spillovers depletion.

scholarly journals Transaction costs: an empirical analysis of their relationship with investment and foreign direct investment

2011 ◽  
Vol 51 (2) ◽  
pp. 175-187 ◽  
Author(s):  
Marcos Vinício Wink Junior ◽  
Hsia Hua Sheng ◽  
William Eid Junior
Keyword(s):  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Direct Investment ◽  
Institutional Economics ◽  
Investment Decisions ◽  
New Institutional Economics ◽  
Investment Rate ◽  
Bric Countries ◽  
Business Environments ◽  
Relevant Role

As stated by the New Institutional Economics theory, transaction costs play a relevant role in economics and, according to the extent of such costs, agents make investment decisions. Actually, transaction costs may represent a disincentive to entrepreneurship. This work aims to verify whether transaction costs are related to investment rate and foreign direct investment rate (FDI) in different business environments. The results suggest that foreign investors do not have precise information about other countries as domestic investors do; as it is observed, only the relation between transaction costs and investment rate is significant. Furthermore, there is evidence that the business environments of BRIC countries are less developed when compared to business environments of other countries in the study

scholarly journals DOES AN EFFICIENT BUSINESS REGULATORY ENVIRONMENT MATTER AT URBAN LEVEL? SOME EVIDENCE FROM CHINESE CITIES

2020 ◽  
Vol 3 (1) ◽  
Author(s):  
Alessandro MARRA ◽  
Vittorio CARLEI
Keyword(s):  
Foreign Direct Investment ◽  
Transaction Costs ◽  
Instrumental Variable ◽  
Direct Investment ◽  
Theoretical Background ◽  
Regulatory Environment ◽  
Chinese Cities ◽  
Long Run ◽  
Urban Level ◽  
Business Regulations

It is widely acknowledged that firms require an efficient regulatory environment: if transaction costs generated by business regulations are not onerous, firms grow more and develop more quickly, attract more foreign direct investment, and employ more workers. But what does it induce alterations in the basic institutional framework? In this paper we intend to test North’s thesis by which as trade expands and the size of the market grows, transaction costs increase requiring that more and more resources should be devoted to improving existing regulations and, then, reducing such costs. The paper is structured as follows. Section 1 introduces. Section 2 provides the theoretical background. Section 3, based on World Bank data on 30 Chinese cities, investigates whether there is a correlation at urban and provincial levels between efficient business regulations on one side and economic outcomes (gross domestic product, foreign direct investment, employment, etc.) on the other. Section 4 addresses the pilot question mentioned above and tests whether simpler and less costly ways of meeting legal requirements for starting and running a business are associated with long-run trade. Section 5 discusses results in the light of theoretically assumed causal links and proposes a 2SLS regression model, whereby a geographical instrumental variable is used to investigate the causal relationship between business regulations and exports.

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