The End of the Opportunism vs Trust Debate: Bounded Reliability as a New Envelope Concept in Research on MNE governance

Modern transaction cost economics (TCE) thinking has developed into a key intellectual foundation of international business (IB) research, but the Williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism. In this paper we assess both the opportunism...

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Bibliographic Details
Published in:Journal of international business studies 2009-12, Vol.40 (9), p.1471-1495
Main Authors: Verbeke, Alain, Greidanus, Nathan S.
Format: Article
Language:English
Subjects:
Behavior
Bounded rationality
Business and Management
Business management
Business schools
Business Strategy/Leadership
Business structures
Business studies
Case studies
Corporate governance
Deceit
Economic commitments
Internalization
International Business
Knowledge management
Management
Management research
Multinational corporations
Multinational enterprises
Opportunistic behavior
Opportunity
Organization
Organization theory
Principal place of business
Rationality
Self interest
Strategic management
Studies
Transaction costs
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Summary:Modern transaction cost economics (TCE) thinking has developed into a key intellectual foundation of international business (IB) research, but the Williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism. In this paper we assess both the opportunism concept and existing alternatives such as trust within the context of IB research, especially work on multinational enterprise (MNE) governance. Case analyses of nine global MNEs illustrate an alternative to the opportunism assumption that captures more fully the mechanisms underlying failed commitments inside the MNE. As a substitute for the often-criticized assumption of opportunism, we propose the envelope concept of bounded reliability (BRel), an assumption that represents more accurately and more completely the reasons for failed commitments, without invalidating the other critical assumption in conventional TCE (and internalization theory) thinking, namely the widely accepted envelope concept of bounded rationality (BRat). Bounded reliability as an envelope concept includes two main components, within the context of global MNE management: opportunism as intentional deceit, and benevolent preference reversal. The implications for IB research of adopting the bounded reliability concept are far reaching, as this concept may increase the legitimacy of comparative institutional analysis in the social sciences.
ISSN:0047-2506
1478-6990
DOI:10.1057/jibs.2009.44