Transaction Cost Determinants and their Impact on the Livelihoods of the <em>Sanasa</em> Beneficiaries in Badulla District in Sri Lanka

Abstract

Scholars have emphasized that Transaction Costs (TC) impede the livelihood success (LS) of small-scale producers. However, the absence of systematic empirical academic work which evaluates how TC affects the LS, particularly small-scale producers creates a gap in the literature. This study attempted to bridge this gap by analyzing the impact of TC on the LS particularly Sanasa beneficiaries who are involving livelihood activities with the support of Sanasa organization in Sri Lanka. The study gathered primary data from 273 members of Sanasa who were engaging in livelihood activities using multi-stage sampling. Data were gathered for a structured questionnaire having face-to-face interviews. Partial Least Square Structural Equation Modeling (PLS-SEM) was used to analyze data. The results revealed that the opportunism of exchange partners has a positive impact on TC and a negative impact on the LS of the Sanasa beneficiaries. The rational ability of Sanasa beneficiaries has a positive influence on LS and a negative effect on TC. Transaction uncertainty negatively relates to the LS while asset specificity has a positive effect on the LS of the Sanasa beneficiaries. Further, the results revealed that TC has a strong negative relationship with the LS of Sanasa beneficiaries. Thus, empirical results confirmed that TC obstructs the LS of Sanasa beneficiaries. Developing a mechanism to empower Sanasa beneficiaries to access information relating to the transaction using modern technology to contact reliable transaction partners would lead to improving livelihoods by minimizing TC.