The boundaries of the firm in global strategy. (9th May 2018)

• Record Type: Journal Article
• Authors: Cuervo‐Cazurra, Alvaro; Mudambi, Ram; Pedersen, Torben
• Is Part Of: Global strategy journal. Volume 8:Number 2(2018)
• Page Start: 211
• Page End: 219
• Publication Date: 2018-05-09
• Subjects: firm boundaries -- global strategy -- home country -- host country -- location -- resource‐based view -- transaction cost economics; Strategic planning -- Periodicals; International business enterprises -- Management -- Periodicals; 658.401205
• DOI: 10.1002/gsj.1208
• Languages: English
• ISSNs: 2042-5791

Abstract

Abstract : Research summary: We briefly review the evolution in the analysis of the boundaries of the firm in global strategy. 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 decisions. 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 simultaneous 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 incorporate the complexity, dynamics, and mechanisms of the complete array of methods to manage boundaries, the complete set of subsidiaries of the multinational, and the complete set of characteristics of the relevant locations.