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  • Authors: Michael Hitt (2004)

  • A critical survey is presented of some of the theories that have been used to explain why multinational enterprises (MNEs) exist, with special emphasis on the transaction costs/internalization approach. The first part of the chapter discusses early capital flow and industrial organization theories in the evolution of the MNE. The second part focuses on transaction costs/internalization theories, which are now dominant theories of the MNE.