An Empirical Investigation of Ex Post Transaction Costs in Franchised Distribution Channels

Abstract

This study focuses on organizational efforts to constrain ex post transaction costs in interorganizational exchange. The theoretical model frames opportunism as a determinant of transaction costs and implicates cooperation and formalization as control structures that alleviate opportunism. The model also examines whether the proposed theoretical relationships are enduring. Franchisee-franchisor relationships in the Norwegian distribution system of a multinational oil refiner provide the context for analysis. A test of the model using multisample data across two time periods indicates that opportunistic behavior consistently increases transaction costs. Furthermore, cooperative interaction curbs bargaining costs, and formalization reduces opportunism. The authors discuss implications for interorganizational theory and franchising management.

Antecedents and consequences of opportunism in buyer–supplier relations: Research synthesis and new frontiers

“…Only under certain circumstances did formal controls affect opportunism, and this relationship is moderated by the hostility of the legal environment. Dahlstrom and Nygaard (1999) found the opposite effect from written contracts and explicit procedures that dictate duties and responsibilities of both parties. In a franchisor-franchisee relationship, opportunism is reduced by formalization, a finding that supports TCA theory.…”

“…Formalization is manifested in many forms. It has been operationalized as the formalization of operating procedures (John, 1984;Provan & Skinner, 1989), centralization of authority (John, 1984), controls (Achrol & Gundlach, 1999;Gilliland & Manning, 2002;John, 1984), and formal contracts (Cavusgil, Deligonul, & Zhang, 2004;Dahlstrom & Nygaard, 1999;Deeds & Hill, 1999). Thus, formalization involves efforts to administer and control the activities, processes, outputs, and obligations of exchange members (Gilliland & Manning, 2002).…”

“…Another supported antecedent is cooperation (Dahlstrom & Nygaard, 1999;Parkhe, 1993). Cooperative behavior, where parties work together to achieve mutual goals (Anderson & Narus, 1990), seems to curtail opportunism.…”

Configuring and managing strategic supplier portfolios

“…Two fundamental issues underlie these works. First is the duality of simultaneously optimizing on relationship factors while minimizing transaction costs (e.g., Dahlstrom & Nygaard, 1999;Heide & Stump, 1995). Second is the increased creation and role of relational (i.e., social) capital in interfirm relational management (e.g., Dwyer et al, 1987;Dyer & Singh, 1998).…”

Collectivist values for learning in organizational relationships in China: the role of trust and vertical coordination

“…It involves the willing, organized exchange of ideas and experiences between partners. In addition to being over and above legal and contractual requirements agreed upon by the partners, this exchange is designed to help partners cope and deal with uncertainties and improve mutual productivity and market performance (Dahlstrom, & Nygaard, 1999).…”