Evolutionary Theory of the Multinational Corporation

Abstract

The evolutionary theory of the MNE views the MNE as an instrument for generating and transferring knowledge. A multinational firm’s ability and incentive to transfer knowledge effectively and efficiently is the main reason for its global footprint. Internal knowledge transfers work better than transfers between firms because of the lower resource costs and greater control over trade secrets of transmitting knowledge internally versus across a market. In evolutionary theory, transaction cost or contractual difficulties are not the main reason why firms become multinational. Evolutionary theory has influenced the knowledge-based and capabilities theories of the MNE in which the MNE is viewed as a repository of knowledge and resources rather than a nexus of contracts.

Keywords: Evolutionary economics, knowledge transfer and innovation in MNEs, tacit/explicit, combinative capability, theory of the MNE, capabilities