Significance Of Transaction-Based Theory Literature Coursework (Coursework Sample)

THE TRANSACTION COST THEORY (TCT) AND RESOURCE BASED VIEW OF THE FIRM (RBV)
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This paper focuses on evaluating the significance of the Transaction Cost Theory and Resource-Based View of the firm (RBV) in order to visualise how multinationals from emerging markets can compete globally. Therefore, the paper will address the cases of McDonald’s and Apple Inc. based on the two theories.
Transaction Cost Theory (TCT)
TCT is an important framework used by many emerging market multinational enterprises to date. Furthermore, TCT is one of the most significant theories of the firm. Its primary focus is on explaining the relationship between the cost of offering goods and services through the market and a firms efforts towards minimising such costs in order to gain competitive advantage or remain relevant and vibrant in the global business environment that has increasingly become dynamic to date (Tiwana and Bush 2007, p.261). TCT involves a system of structure which depicts the relationship between a firm’s transactions and related costs and attributes (Alaghehband et al. 2011, p.126). Therefore, TCT holds that when firms make any transaction, they incur a cost. TCT explains the crucial comparative analysis of a firm’s transactions carried out through markets (Alvarez-Suescun 2010, p.632). According to Poppo and Zenger (1998, p.854), TCT plays a vital role in mode choice decisions associated with internationalisation approach. The authors argue that multinationals use TCT when analysing foreign transactions to minimise the costs of doing business in foreign markets. According to Alexander (2001, p.756), while TCT initially addressed economic exchanges, the theory now highlights all transactions undertaken by multinationals from emerging markets. Therefore, TCT provides a specific mechanism for a firm evaluate transactions carried out within the organisation and those conducted in the market.