transaction cost theory Flashcards
transactions
economic exchange
power of the free market
coordination of production and exchange of goods through prices
why do org exist
because market is not free
kinds of transactioncosts
search, contracting, monitoring, enforcing
unit of analysis tct
economic transactions
HOW TCT
uncertainty, frequency, asset specificity -> choice of governance structure
behavioral assumptions
bounded rationality and opportunism
governance structures
institutional arrangement that coordinates and controls economic transactions between actors
governance structure types
market, hybrid, hierarchy
market
autonomous parties exchange are governed by prices in supply and demand equilibrium
hybrid
longterm contractual relations that preserve autonomy but provided added transaction specific safeguards as compared with the market
hierarchy
transaction among parties occur under a unified owner, who settles disputes by administrative fiat
asset specificity
possibilities of alternative use of investments
asset specificity types
site specificity, physical asset specificity, human assetspecificity, dedicated asset specificity
higher uncertainty and asset specificity
higher hierachical governance structure
TCT
organizational factors attempt to maximize the profit of interdependence by assigning transactions to governance structures in a discriminating way
bounded rationality
not all the info is available
opportunism
seeking self interest
site specificity
competitors located next to each other
physical assetspecificity
truck
human assetspecificity
manager with knowledge how to deal with a client
dedicated assetspecificity
software programme for communication
temporal dedicated assetspecificity
need to deliver in time or lose value
procedural dedicated assetspecificity
work flows are customized to transaction
primary uncertainty
lack of knowlegde about potential states of nature
secondary uncertainty
actions of others
behavioral uncertainty
inability to predict opportunistic actions of others
information asymmetry
all parties do not have same information
appropriability
degree to which an economic actor can protects its knowledge from leakage to other parties
higher frequency
overhead costs are lower, hierachical governance higher
relational governance
ongoing recurrent transactions more than only economic relation
