Managing the Internalisation Process

Drawing on insights from managerially-oriented literature, this article explores the role of management in situations where the market transaction costs of using local, independent operators are negligible at market entry, but grow over time. A key question pertaining to this situation is: What management instruments may ensure persistent concurrence between changing pressure for internalisation in a foreign market and the effectuated internalisation of a MNE in that market? The article demonstrates the operating cost saving potential of putting in place options for gradual internalisation. Practical examples of such options are outlined. It is emphasized that gradual internalisation not only pertains to appropriation of local operators' financial assets, but also to their non-financial assets in relation to user rights, customer relations, and value added activities.