Information, transaction costs, and the organization of distribution: The case of Japan's general trading companies

Abstract

This paper develops a transaction cost analysis of the organizational choice for distribution in foreign trade. Implications for the choice between internal organization and agency delegation are drawn and tested with data from Japan's general trading firms. The patterns of agency delegation experienced by these companies are shown to be consistent with the view that the governance cost problems associated with the acquisition and transmission of information have a systematic impact on the organization of trading activities. Specifically, the integrated mode of distribution is ascribed to the hazards of incomplete contracting posed by the existence of a previously disregarded specialized asset, brand name capital.