The Effect of National Ethical Environment on MNC Subsidiary Ownership : Transaction Cost and Learning Perspectives

We examine the link between national ethical attitude and transaction cost economics (TCE) in the context of multinational corporations' (MNCs') subsidiary ownership research. By theoretically distinguishing the TCE assumptions of opportunism and bounded rationality and by linking bounded rationality to learning after its conceptual separation from opportunism, we develop and test hypotheses on how MNCs learn to reduce their bounded rationality in coping with opportunism and thus manage their dynamic firm boundaries. In so doing, this study further sheds light on the debate between the TCE and organizational capability perspectives. Our results showed that both TCE and organizational capability perspectives are necessary to complement each other to fully define the dynamic boundaries of MNCs