We think that this hypothesis is valid. Kron International has a great need to control the transaction costs. The company has mostly established in the nearby market, the Nordic countries and Germany. One of the reasons for choosing these nearby markets is to maintain control over the products and make sure they are promoted in a right way. The main reason for only existing in the nearby market is that they posses knowledge about this market and do not need to buy information from another actor able to overprice and/or underperform. To avoid opportunism and moral hazard, in other words to be cheated from other business actors, Kron International keeps all production in Vinslov. Mr. Ahlberg states that this is a way for the company to maintain control. An example that Kron International tries to keep control over transactions, when it comes to Sweden, is that the company only tries to sell products to chains of stores like ICA, Axfood and Coop. Instead of having transactions with hundreds of stores Kron International delivers products to these chains centrally in order to have fewer transactions. This makes it easier for Kron to maintain control. Kron International uses the same strategy when exporting, for instance to Iceland, where the company delivers to a wholesaler. Mr. Ahlberg states that lack of control is a reason not to enter the Japanese market. When it comes to the other small company, Furninova, the need for control of transactions is not as high as for Kron International. However, the need is greater than for Backer AB, Perstorp AB and Alfa Laval. Funinova's production is mainly located in Poland and a small part of production is located in Denmark. The facilities are wholly owned subsidiaries where internal control of transactions is achieved. When the Danish facility was acquired in 2003, knowledge could be transferred from the facility in Poland. Since Furninova does not have any sales offices and sales representatives Mr. Nilsson states that the lack of control over transactions is an obstacle for entering the U.S market.

   Alfa Laval has 20 production facilities in six countries and services centres in 47 countries. Sales representations exist in 45 countries and sales companies in 50 countries. This makes Alfa Laval a highly internalised company. Mr. Hermansson stated as an example that if Alfa Laval were interested in establishment in Paraguay, the company could easily transfer knowledge from existing establishment in Uruguay. Due to large resources and a long internationalisation history Perstorp AB is also able for establishment everywhere in the world. Perstorp AB and Alfa Laval are very good examples of internalised companies that have chosen to invest abroad in own facilities rather than through, for example license. These companies' firm-specific assets are technical know-how, which is an intangible asset and means that it is difficult to do business with. In order to avoid market participants 'cheating' behaviour as overpricing and/or underperforming these companies have chosen to organise transactions through hierarchy instead of the price system.

   This hypothesis is valid to some extent. Regarding this hypothesis we may only use four of the companies in our study since Kron International has no international production. Mr. Hermansson at Alfa Laval stresses that the most important factor when setting up a new facility abroad is low costs, but not low cost labour since Alfa Laval invests heavily in new machines, in order to be less labour intensive. Another factor influencing Alfa Laval's decision of production location is to be present at the key markets. Another influencing factor is the possibilities for good transportation in the chosen locations. According to Mr. Johansson Perstorp AB is able to produce everywhere in the world. Factors that influence Perstorp AB's choice of production location are the structure of the market, production costs as access to raw materials and gas and closeness to harbours for easy transportation and low costs of shipping. Mr. Johansson stress that labour costs is of minor importance.