Factors That Influence Multinational Corporations' Control of Their Operations in Foreign Markets: An Empirical Investigation

Abstract

Multinational corporations' (MNCs') control over their foreign operations plays an important role in implementing their global marketing strategy. In the past, transaction cost analysis and bargaining power theory have been widely cited to explain the degree of control MNCs exert over their foreign operations. However, research explicitly combining these two perspectives has been limited. To address the gap in the literature, the authors present a joint model that combines the two alternative theories to explain MNCs' control, and they compare their relative explanatory power. Using primary survey data, they perform an empirical test of the relative explanatory power of these two theories. The results suggest that three factors, two drawn from bargaining power theory and one from transaction cost analysis, are key factors in explaining MNCs' degree of control over their foreign operations. The article concludes with a discussion of the theoretical and managerial implications.