The Role of Country Alliances in Reducing the Transaction Costs of Internationalisation: Evidence from Indian Multinational Enterprises

This paper analyses the role of home-host country alliances in reducing transaction costs in the internationalisation process. We test hypotheses about the role of country-level alliances and firm internationalisation with comprehensive longitudinal multi-industry data on 623 acquisitions made by Indian multinational enterprises (MNEs) between 2000 and 2007 on a panel of 65 host countries. The results show that country alliances reduce the transaction costs arising from the distance

between home-host countries, thereby positively influencing the internationalisation of Indian MNEs. However, the extent of that influence depends upon the nature of the alliance. Our findings have significant implications for public policy and theory.