Knowledge-based Theory of the MNE

The knowledge-based theory of the multinational enterprise (MNE) is a theory that aims to explain the existence of the MNE as a function of its superior ability to facilitate international knowledge exchange. The productive role of knowledge and the notion that knowledge shapes both the performance and the economic organization of the MNE has been part and parcel of most MNE theory since Buckley and Casson’s (1976) seminal contribution. Whereas others had focused on imperfections in intermediate product markets, Buckley and Casson highlighted knowledge flows between R&D and production (while not excluding other intermediate products). Knowledge-based advantages were seen as primary examples of “ownership advantages” in Dunning’s “eclectic paradigm.” Other scholars in the international business fields also pointed to the characteristics of knowledge as major determinants of the boundaries of the MNE.