Transaction Cost Economics Perspective Research Articles

FOUNDATIONS OF CONTEMPORARY ECONOMICS: NEW INSTITUTIONAL ECONOMICS VS. NEW ECONOMIC SOCIOLOGY – THE GRANOVETTER-WILLIAMSON DEBATE

FOUNDATIONS OF CONTEMPORARY ECONOMICS: NEW INSTITUTIONAL ECONOMICS VS. NEW ECONOMIC SOCIOLOGY – THE GRANOVETTER-WILLIAMSON DEBATE

The e-commerce platform conundrum: How manufacturers' leanings affect their internationalization

Internationalization is seen as a commercial opportunity and, in some circumstances, necessary for many firms' resilience in today's volatile and unpredictable global marketplace. Most exporting organizations must cope with various emergent e-commerce digital platforms, given the rising importance of digital and technological transformation of modern international trade and its related strategic challenges. The spread of third-party multi-sided platforms (TPMPs) and established actors such as Amazon, eBay, and Alibaba, has led research to overlook evaluations involving other types of multi-sided e-commerce platforms, such as content management systems (CMSs). Nevertheless, these other platforms are evolving by leaps and bounds and changing the rules of the game for e-commerce website development. This study draws on the transaction cost economics perspective and theory of boundary choices to shed light on the differences in manufacturing firms' internationalization performances from the reliance among CMSs and TPMPs. The study retrieves data from a survey of 263 manufacturing firms' managers and executives relying on structured equation modeling. The findings outline that adopting CMSs partially mediates the relationship between e-commerce strategic commitment and internationalization performances. In contrast, TPMPs negatively moderate the relationship between e-commerce commitment and CMS and between e-commerce commitment and internationalization despite directly partially enhancing internationalization performances. Finally, the study reveals an inverted U-shaped relationship between e-commerce commitment and TPMP reliance.

Offshoring, hierarchical control and transnational and dynamic environments

PurposeThis study aims to examine the effect of exploratory innovation offshoring on the level of hierarchical control and how this effect is moderated by transnational and dynamic environments.Design/methodology/approachThis study draws on a sample of 148 Taiwanese multinational enterprises to examine their governance decisions on foreign investments.FindingsFindings show that the more innovation offshoring is exploratory, the higher the level of hierarchical control will be used by multinational enterprises (MNEs) and that transnational and dynamic environments have different moderation effects on the positive exploratory innovation offshoring-hierarchical control relationship.Research limitations/implicationsThis study has two theoretical implications. First, this study extends the concept of complexity from a transaction attribute level (problem) to an environmental level (transnational environment) and finds that exploratory innovation offshoring and transnational environments interactively impact governance choices. Second, this study distinguishes between two sources of technological uncertainty – uncertainty due to transaction-level attributes (exploratory innovation offshoring) and external environments (dynamic environments) and finds that exploratory innovation offshoring and dynamic environments interactively impact governance choices.Practical implicationsThe practical implication of this study lies in the simultaneous consideration of exploratory innovation offshoring and transnational/dynamic environments, which will allow international decision-makers to adjust/select the governance forms most appropriate for speedy responding to and handling environmental changes.Originality/valueThis study employs the theoretical perspectives of transaction cost economics (TCE) and resource-based view (RBV) to analyze and discuss the impact of operational environments – transnational and dynamic environments – on MNEs’ decisions on the governance structure for a given innovation offshoring.

Making Lemonade from Lemons: A Transaction Cost Economics Perspective on Third-Party Disruptions in a Multivendor Information Technology Service

In modern enterprise computing environments, multiple information technology (IT) services from first and third parties are often integrated to form coherent solutions for enterprise customers. In this study, we seek to understand how uncertainties introduced by third-party services shape enterprise customers’ use of various IT services in these multivendor service settings. Specifically, we analyze a case of disruption caused by a third party that affects the multivendor service but does not directly affect the first-party services. We find a temporary increase in the use of first-party services that serve as similar-goal substitutes during the disruption; however, there is a net decline in the total use of services in the long run. To assess what actions the first party can take during such disruptions to turn the challenge into an opportunity, we analyze the first party’s technical support log using deep learning techniques. We find that if the first party offers high-quality technical support that addresses product-related issues, it may be able to make lemonade out of lemons. Such technical support effectively boosts customers’ use of first-party services in the long run. Curiously, however, similar efforts by the first party in the predisruption period are ineffective in achieving the same effect.

Firm Status and Scope: A Dynamic View

This paper extends the traditional transaction cost economics (TCE) perspective by taking account of status differences of transaction participants. Based on the status-based model of market competition proposed by Podolny (1993), I examine how transaction cost advantages or disadvantages originating from status differences affect market participants’ economic incentives and strategic objectives regarding their vertical and horizontal scope decision. I also examine long-term consequences of firms’ decisions and the implications of these consequences for high and low status firms. Considering status differences makes it clear that a considerable conceptual overlap exists between TCE and the resource-based view (RBV).

Firm performance in digitally integrated supply chains: a combined perspective of transaction cost economics and relational exchange theory

PurposeThis paper aims to examine how interfirm transactional and relational assets drive firm performance (FP) in digitally integrated supply chains.Design/methodology/approachThe authors combine the Transaction Cost Economics (TCE) and Relational Exchange Theory (RET) frameworks to hypothesize that FP will be a function of Asset Specificity (AS), Digital Technology Usage (DTU) and Collaborative Information Sharing (CIS). In addition, the authors hypothesize that Supply Chain Integration (SCI) will partially mediate the effect of DTU and fully mediate the impact of AS and CIS on FP. A cross-sectional survey of supply chain managers is used to test the hypotheses.FindingsFindings indicate that specific investments in digitally integrated supply chains would increase FP. In addition, SCI fully mediates the relationships between AS and FP and CIS and FP, while SCI partially mediates the influence of DTU on FP.Practical implicationsManagers could strategically engage in the technologies that effectively fit within the firm’s supply chain strategies and seek to develop a pragmatic expertise that enables the effective use of technology in a comprehensive setting.Originality/valueThe study enriches the extant literature by incorporating TCE and RET as contradictory viewpoints on AS and investigating how transactional and relational assets affect FP in digitally integrated supply chains.

Brand–SMI collaboration in influencer marketing campaigns: A transaction cost economics perspective

Brands are showing an increasing appetite for influencer marketing campaigns in order to accentuate the exclusivity of their products. While the literature supports influencer marketing as a competent persuasive marketing strategy for reaching niche audiences, studies investigating influencer collaboration management strategies to evade the associated challenges remain scant. Thus, influencer marketing is at risk of wasted investment and a low success rate. This research draws on transaction cost economics theory to investigate how brands effectively manage collaboration with social media influencers (SMIs) using a multi-case-study approach of influencer marketing campaigns in 15 brands. Our findings identify critical management strategies and develop a collaboration management framework for effective collaboration. We also highlight control factors to steer brand–SMI collaboration, offering a more nuanced understanding of influencer marketing collaboration management strategies. This paper marks an exploratory step toward understanding influencer marketing from brands' perspectives and offers guidance for brands on how best to engage in effective influencer collaboration.

Customizing governance mechanisms to reduce opportunism in buyer–supplier relationships in the digital economy

Digitalization benefits supply chains but also creates new challenges for buyer–supplier relationship governance. An imbalance of digitalization between exchange partners increases dependence, information asymmetry, and data leakage, which can result in a high risk of opportunism for the less digitalized firm. However, few studies have examined how to handle this opportunism in today's digital economy. Adopting a transaction cost economics perspective, we examined the customization of combinations of traditional governance instruments, including contracts, monitoring, communication, and relational norms, to efficiently combat opportunism. Applying fuzzy-set qualitative comparative analysis (fsQCA) to data collected from 137 manufacturing firms, we identified five customized combinations of various governance mechanisms that effectively reduce opportunism between supply chain partners. However, transactional mechanisms alone offer the best empirical explanation for lowering perceived opportunism than a combination of relational and transactional mechanisms. This study contributes to the literature on supply chain relationship management in the digital economy and provides practical guidance to help firms establish an appropriate governance structure to mitigate opportunism.

Implementation of blockchain-enabled supply chain finance solutions in the agricultural commodity supply chain: a transaction cost economics perspective

Agricultural commodity supply chains are characterised by the involvement of multiple intermediaries, lack of access to finance and poor financial conditions of farmers. Additionally, there exist numerous inefficiencies and a lack of transparency in the trading processes. Blockchain-enabled supply chain finance (SCF) solutions can potentially help to overcome these problems. However, there is limited research on the process of developing and implementing such solutions and the potential consequences of their implementation. In this paper, we apply the Context-Intervention-Mechanism-Outcome (CIMO) framework to systematically analyse case studies of four firms that have developed blockchain-enabled SCF solutions in agricultural commodity supply chains. The findings show that blockchain-enabled SCF solutions can reduce different types of transaction costs such as costs associated with information search, negotiation and contracting costs, and costs of accessing finance. The solutions designed with the core objective of improving the financial conditions of farmers will differ from those with the core objective of reducing process inefficiencies. The findings of the study will benefit companies planning to develop and implement blockchain-enabled SCF solutions, by highlighting operational challenges and offering concrete solutions on how they can be overcome.

Transaction Cost Economics Perspectives on Indonesian Public-Private Partnership (PPP): Case Study on Umbulan Water Supply System PPP (Working Paper)

Transaction Cost Economics Perspectives on Indonesian Public-Private Partnership (PPP): Case Study on Umbulan Water Supply System PPP (Working Paper)

Environmental uncertainty, relationship commitment, and information sharing: the social exchange theory and transaction cost economics perspectives

ABSTRACT Although relationship commitment (RC) is the foundation for inter-firm information sharing (IS) activities, extant studies have only discussed the influence of normative RC on IS but ignored the impact of instrumental RC and the moderators that affect these relationships. Combining transaction cost economics (TCE) and social exchange theory (SET), this study probes the impacts of normative RC and instrumental RC on IS content and IS system between manufacturers and suppliers and investigates the moderating effects of environmental uncertainty (EUN) on these relationships. Using the data collected from 410 Chinese manufacturers, this research finds that normative RC promotes IS content and IS system, but instrumental RC generates non-significant impacts on them. However, these effects significantly change when the business environment becomes more uncertain, demonstrating the necessity to consider EUN as the moderator. Besides, supplier IS content and IS system improve service performance and IS system increases IS content.

Copyright Governance for Online Short Videos: Perspective of Transaction Cost Economics

In recent years, copyright governance for short videos has become a hot issue of common concern in the academic community and the industry. Therefore, this study intends to explore the economic aspect of copyright governance in relation to the proliferation of infringing short videos. The short video industry of China has been taken as a case to demonstrate the copyright governance issue. Transaction cost theory has been applied to analyze the economic aspect of copyright governance in terms of four dimensions: bounded rationality, opportunism, environmental uncertainty, and asset specificity. From the perspective of transaction cost economics, the problem of short video infringement is observed to be essentially a market failure due to high transaction costs. In the short video market, substantial transaction costs are incurred in the legal transaction of copyright with these costs considered to be too high. This is especially the case when transaction costs exceed the net proceeds initially expected by short video users from the authorization, making it impossible to carry out the transaction and leading to infringement. To effectively control the copyright infringement of short videos, it is necessary to build a cross-platform information-sharing mechanism to reduce search costs, establish a unified copyright management platform to reduce coordination costs, and give full attention to the role of technical support to reduce regulatory costs.

An Analysis of Transaction Costs Involved in the Urban Village Redevelopment Process in China

A well-designed institutional arrangement for urban village redevelopment projects (UVRPs) must consider transaction costs, but academic papers discussing it from the perspective of transaction cost economics are lacking. This paper applies theory of transaction cost economics to analyse the types and sizes of transaction costs and who bears these costs during redevelopment when implementing UVRPs in China. This paper finds that transactions in UVRPs have high asset specificity, high uncertainty and low frequency, which easily results in high levels of transaction costs. Based on 439 UVRPs collected from seven cities, this paper finds that UVRPs implemented with top–down institutional arrangements remain prevalent in China. Based on semi-structured interviews with participating parties, this paper proves that the sizes and types of transaction costs and the distribution of these costs borne by different participating parties vary with the change of stage under dissimilar institutional arrangements. This implies that a high level of transaction costs at one stage does not necessarily mean the costs stay high at another stage. Transaction costs have essential implications for process efficiency, so policymakers need to consider transaction costs and use hybrid institutional arrangements to enhance the efficiency and sustainability of policies.

Understanding consumers’ intention to switch to electric motorcycles: a transaction cost economics perspective

ABSTRACT In the context of global commitment to decarbonising the highly urbanising world, studies of consumer thinking regarding switching to electric motorcycles are lacking. Our study therefore attempts to provide a first illustration of a model drawing on transaction cost economics (TCE) theory. We hypothesise that consumers’ intention to switch to electric motorcycles is based on perceived transaction costs (i.e. search and adoption costs), and transaction costs are determined by different types of uncertainty (i.e. branding, environmental, performance and behavioural uncertainty), and dependability. Given recent calls to develop our understanding of green consumption in different contexts, we use the Asia Pacific region as an illustrative context. Regression modelling is based on data collected from a sample of 1094 consumers in Taipei. Our findings confirm all of the proposed hypotheses. The implications of the findings are discussed as well as the limitations of the study and recommendations for further research.

Rapid internationalization and exit of exporters: The role of digital platforms

Digital platforms have been developing fast which transform the benefits and costs of rapid internationalization of firms on them. Employing transaction cost economics perspective, we argue that the transaction attributes of asset specificity, transaction uncertainty, and transaction frequency, have all changed fundamentally in digital platform-based transactions. They render the organizational learning in rapid Internet exporting to counterbalance the diseconomies of time compression caused by the lack of organizational absorptive capacity. By using the three attributes as underlying mechanisms, we hypothesize that the expansion speed of exporters on digital platforms reduces exit hazards of the exporters. We further hypothesize that digital signals on product quality strengthen the main effect. As for digital infrastructure, we recognize its competing effects and make curvilinear moderating hypotheses. Survival analyses based on 353,636 entries of real transaction records from a digital exporting platform have provided robust findings. This study highlights the importance of examining how the digital platform reshapes the transaction attributes and internationalization-performance relationship.

Property rights and reputation in the dairy agro-industrial system

Purpose The purpose of this study is to understand the effect of governance structure alignment, property rights protection, and reputation in generating efficiency in dairy agro-industrial system in Paraná, Brazil, and Midi-Pyrénées, France. Design/methodology/approach Descriptive qualitative research, comprising semi-structured interviews with producers, processors and key agents of the dairy agrindustrial system in Brazil and France, in 2016/2017. Findings As a result, it was identified that measurement generates information about transacted dimensions and when it is shared can generate affect reputation in transactions that leads to system improvement. It was also observed that, in the dairy agro-industrial system, reputation acquired does not reduce all the measurement costs, as the product requires measurement in each all collection, regardless of the reputation created. Research limitations/implications As a limitation of the study, there is a difference in the moments when the interviews were done. In 2016, in France, the context was low prices, while in 2017, in Brazil, there was a rise in prices. This difference could have influenced some responses to the interviews, mainly about efficiency by producers. Practical implications Reputation, protecion of property rights by measurement and information sharing allows reduction costs (transaction, measurement and negotiation costs). This efficiency implies improvement to the system, in cases of milk producers and processors. Social implications Improvements in the dairy system can have repercussions on several other improvements such as better distribution of income among agents in the chain; better-paid producers, which implies the improving quality of lives of these people; better products offered to consumers. Originality/value From a complementary perspective of transaction cost economics and measurement cost economics, reputation and protection of property rights are discussed with a focus on efficiency. Empirically, the paper contains heterogeneous data collected from two countries: Brasil and France.

Understanding SME suppliers' response to supply chain finance: a transaction cost economics perspective

PurposeReverse factoring (RF) is one of the most prevalent supply chain finance (SCF) solutions. This study challenges the view that suppliers accept financially attractive reverse factoring offers (RFOs) and reject financially unattractive ones. Specifically, it focuses on small and medium enterprise (SME) suppliers and how transaction cost economics (TCE) factors affect their decision.Design/methodology/approachThe authors study eight cases of RFOs, interviewing suppliers, buyers and financial service providers (FSPs) and using several sources of private and publicly available secondary data.FindingsIn five out of eight RFOs, suppliers either accepted unattractive offers or rejected attractive ones. Bounded rationality and opportunism seem to explain such misalignment, while asset specificity and frequency play a minor role in decisions.Research limitations/implicationsThe study shows the need for further investigation linking analytical assessment of SCF benefits with qualitative factors.Practical implicationsSME suppliers cannot assume an RFO will benefit them. They must critically evaluate their buyers' offers, ideally with self-awareness towards how the abovementioned factors might affect their decisions. For buyers and banks, this study gives clear insights on how to approach SME suppliers to avoid rejection of financially attractive RFOs.Originality/valueThis contribution analyses financial attractiveness of RFOs in conjunction with qualitative factors, including rejected RFOs and without assuming that RFOs are financially attractive for suppliers. This is original and relevant for both research and practice, since it extends the understanding of the supplier response to RFOs, thanks to the consideration of TCE factors.

Formas de adaptación de los productores de café a la liberalización del mercado: propuesta de tipología analítica basada en un estudio de caso en la región de Matas de Minas

The article addresses the forms of adaptation that coffee farmers adopt to the context of market liberalization. We analyze how coffee growers build their strategies for adapting to the new context and the relationship of these strategies with the reconfiguration of forms of market control. A case study was carried out in the Matas de Minas region, typically an area of ​​family production, considering the post-1990 period, being a region still little considered in the literature. Based on the qualitative data obtained through the research, we propose an analytical model focused on the construction of a typology of producers, which aims to describe the diversity of ways of adapting to the new economic and institutional context defined by liberalization. The analysis is based on the neoinstitutional perspective of economic sociology, focusing on the processes of social construction of market strategies and structures, in this case guided, fundamentally, by the issue of the social construction of quality. This analytical proposal is opposed to the perspective of transaction cost economics, the main model to guide studies on agro-industrial or agri-food systems in Brazil today, offering a theoretical and methodological alternative.

Asset specificity and relationship performance: A meta-analysis over three decades

In buyer-supplier relationships firms may find it convenient or economical to unilaterally invest in high levels of assets exclusively dedicated to a specific transaction. While they can be associated with potential benefits, such investments dedicated to a specific relationship incorporate risks as their utility and value are tied to the relationship continuation. This study investigates the direct effects of high asset specificity on relationship performance by focusing on the theoretical tensions between Transaction Cost Economics (TCE) and Relational Exchange Theory (RET). A meta- analysis of 33 articles is adopted to investigate the empirical literature on the topic. The results show a positive effect of high asset specificity on relationship performance. However, by unveiling some inconsistencies in the empirical literature, this study also proposes a possible reconciliation of TCE and RET perspectives, with the intention of depicting a more comprehensive view of the phenomenon.

Adopting environmentally-friendly certifications: transaction cost and capabilities perspectives within the Italian wine supply chain

Purpose Environmentally-friendly certifications have increased over the past decade within food supply chains. Although a large body of literature has explored the drivers leading firms to adopt such certifications, it has not closely examined the strategic motivations associated with their adoption. This paper aims to investigate an environmentally-friendly certification, VIVA, examining its role as an alternative form of supply chain governance. The aim is to investigate the drivers affecting the adoption of VIVA and to assess managerial perceptions related to transaction-related characteristics and the firm’s internal resources and capabilities. Design/methodology/approach This study draws upon both an extended transaction cost economics perspective, which is based on transaction risks and the resource-based view, which examines a firm’s internal resources. A survey was conducted via a structured questionnaire sent to all of the wine producers in charge of the decision regarding whether to adopt VIVA certification. A Hierarchal Bayesian Model was applied to analyse questionnaire responses. Such a model allows us to specify the probabilistic relationship between questions and latent constructs and to carry over uncertainty across modelling levels. Findings The adoption of this environmentally-friendly certification is envisioned as a tool to curb internal risks, and thus to manage behavioural uncertainty within the supply chain. A high level of exposure to exogenous transaction risks discourages firms from adopting VIVA certification. The certification system is not perceived as a promoter of operational capabilities. Managers are more likely to implement the certification when they expect that its adoption will leverage their potential knowledge of the supply chain or prompt new and better collaborations with the suppliers. Therefore, the certification can become a resource that interacts with the capabilities of the firm, expressing complementarities that stimulate the formation of dynamic capabilities. Research limitations/implications The identification of drivers from the two theoretical perspectives offers insights into the attributes that are perceived as important by managers and which, therefore, could be leveraged to foster the adoption of the environmental certification. The external validity of the study could be improved by extending the sample to other certifications and supply chains. Originality/value The study offers a different perspective on environmental certification. It demonstrates that considering the certification as an alternative form of supply chain governance opens up a set of efficiency and strategic considerations that could be addressed to promote the effectiveness of an environmental strategy within a supply chain