The Boundaries of the Firm in Global Strategy

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 the 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 consideration of all operations of the multinational, and the simultaneous consideration of the characteristics of all the locations where the multinational operates. These suggestions help better connect the three drivers of firm boundaries: transactions, resources, and locations