The determinants of the vertical boundaries of the construction firm: response

Abstract

Chang seems to suggest that developing closer relations between Transaction Cost Economics (TCE) and the Resource‐Based View (RBV) is not yet needed. However, we are unmoved in our belief that this development is compelling and remain committed to our approach to pluralism. We disagree with Chang's critiques of our approach. We clarify that a synthesis of TCE and RBV along the lines of theoretical monism is not attempted. On this basis, two of the three questions raised, labelled ‘ontological dissonance’ and ‘variable multicollinearity’, are not applicable. With regard to the other question that relates to refutability, Barney has shown that the variables are refutable and Barney also makes reference to empirical work pertaining to RBV. We agree with Chang that TCE is weak on differential production and believe that an acceptance of the coexistence of TCE and RBV is likely to make both theories more successful on the issue of vertical integration. In the end, pluralism appeals as much to us as it does to the chief proponents of TCE and RBV, as a means of making progress in the near term.