Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals Before 1939
- 1 September 1983
- journal article
- research article
- Published by Cambridge University Press (CUP) in The Journal of Economic History
- Vol. 43 (3) , 675-686
- https://doi.org/10.1017/s0022050700030308
Abstract
This paper analyzes the transition from agents to branch selling as alternative institutional modes for transacting abroad by pre-1939 British manufacturing multinationals. A model to explain the shift between alternative modes is specified in terms of transaction costs. Agent opportunism and contract monitoring costs are the major transaction costs. Besides transaction costs, the frequency of transactions and the accumulation of market-specific knowledge by the principal were found to be important variables.Keywords
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