Transaction costs versus resource value?

Abstract

Two major advances in the theory of the firm and (micro)economics more generally are arguably transaction costs economics (TCE) and the theory of firm resources. TCE has originally been applied to the theory of the firm, but found applications in virtually all fields of economic inquiry. The theory of firm resources currently spans much of the industrial organisation (IO) and strategic management literature. In some fields, e.g. diversification, it has already acquired dominant status. Despite significant progress in TCE there still seem to remain significant unresolved issues. Indeed we claim that transaction cost economics fail to supply convincing answers to the issues of the nature of the firm (why do firms exist?), and their essence (running a business). It offers a partial explanation of the “nature” and little on the “essence”. The resource value view complements the nature side and goes far beyond on the essence issue. It provides a fruitful starting point for an integrative framework. This, we suggest, should be based on the resource value perspective story and craft (dynamic) transaction costs in the ensuing evolutionary tale.

The evolution of interorganizational relationships in emerging ventures: An ethnographic study within the new product development process

“…Often drawing from transaction cost economics (TCE) and the resource-based view (RBV) of the firm, research on outsourcing stresses how the contracting of peripheral activities to other firms allows a business to focus on its core capabilities (Quinn, 1999) and to minimize expenses (Pitelis and Pseiridis, 1999). While research on alliances also draws from TCE and RBV (Artz, 1999;Deeds and Hill, 1998;Rothaermel and Deeds, 2006), this research tends to place greater emphasis on the importance of organizational learning and combining complementary assets (Doz, 1996;Fichman and Levinthal, 1991;Gulati, 1998;Ireland et al, 2002;Lavie, 2006).…”

Edith Penrose, organisational economics and business strategy: an assessment and extension

“…To the extent that (as we believe) dynamic (by definition given Penrose's framework) transaction costs can also be of relevance, it will be the overall dynamic transaction costs reductions cum knowledge-induced productivity benefits that could explain the Coasean firm. Critically and importantly, however, the very perception of when and how to reduce transaction costs can only be afforded through intra-firm knowledge generation, see, among others Fransman (1994), Pitelis and Pseiridis (1999). To assume that firms know this beforehand is far too unrealistic.…”

Effect of Network Structure on Transaction Cost of Small Enterprises in Sri Lanka: An Empirical Study

“…Transaction Cost Economics (TCE) underline that opportunism of exchange partners is one of the major reason for generating TC (Williamson, 1981). SEs have a high possibility to suffer hazards from opportunistic behavior of the exchange partners due to the lack of knowledge to access and assess information, the lack of time and capacity to gather and handle information, the lack of resources to access and evaluate information, the lack of experience to avoid opportunism (Carmel and Nicholson, 2005;Nooteboom, 1993;Pitelis and Pseiridis, 1999). If SEs spend money and time to search information, negotiation, monitoring transaction activities to avoid opportunism, their TC will increase (Coff, 2001;Joskow, 1995).…”