Transactions, power and contested exchange: towards a theory of exchange in business relationships

Abstract

Notwithstanding Williamson's view that current definitions of power are overreliant on resource-dependency arguments and tautological, it is argued that it is possible to develop a theoretically robust and empirically rigorous reconceptualisation of power in business transactions. This requires an understanding of the commensurability of the objective interests of transaction partners, and a more detailed specification of the structural and cognitive power resources available to shape contractual outcomes asymmetrically, in horizontal and vertical business relationships. It is argued that exchange can be both contested and uncontested, but power is only relevant when exchange is contested. When power is exerted it is possible to conceptualise three dimensions of power and leverage in business and economic transactions, and this provides the starting point for a theory of exchange in business relationships.