The Institutions of Industrial Governance

Abstract

The unit of analysis in the transaction-cost approach is the transaction that takes place between two parties. According to transaction-cost theory, the governance structure found is the result of an effort to minimize transaction costs, which leads to the establishment of either market, hierarchical, or some intermediate form of governance. Through this focus on the single transaction, however, this approach tends to overlook the fact that the transaction between two parties usually is part of a whole system of transactions and relations with strong interdependences. The present paper develops the idea that a set of transactions is a more relevant unit of analysis and presents an illustrative case from the Swedish food industry. Exploring this case leads, in turn, to the suggestion that by focusing on interorganizational theory and on approaches complementary to a transaction-cost