The underdetermined knowledge-based theory of the MNC

This paper revisits two core propositions in the knowledge-based view of the firm propounded in the seminal work by Kogut and Zander (1993): (a) that MNCs exist because transfers and re-combinations of knowledge occur more efficiently inside MNCs than between MNCs and third parties, and (b) the threat of opportunism is not necessary (although it may be sufficient), to explain the existence of the MNC. We question these conclusions, arguing that firms are only one of many types of ‘epistemic communities’ possessing and nurturing procedural norms, identity, and the cognitive, linguistic and reflexive attributes conducive to efficient exchange and recombination of knowledge. Through their ability to attenuate opportunism, the existence of non-firm epistemic communities has interesting implications not only for the knowledge-based view but also for the applicability of transaction cost economics in the analysis of the scope of the firm.