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Long-Term Buyer/Seller Governance Mechanisms: The Implications For Transaction Cost Theory - A Qualitative Study

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  • Economics
  • Law
  • Political Science


Decisions concerning the structure of economic exchange, from the 'make or buy' decision of the manager to government antitrust policy, are being increasingly influenced by Transaction Cost' (TC) theorising. The 'hybrid' represents an important form of economic structure. However TC theory fails to adequately address a number of issues relating to the governance and other aspects of hybrid activity. An in-depth qualitative investigation into the governance mechanisms of a number of 'hybrids' (long-term interfirm relationships) highlights these issues. These include: the location of the hybrid along the market/hierarchy continuum; that nature of hybrid exchange; the limitations of the behavioural assumptions; the limitations of dyadic analysis; the role of transaction-specific investment in determining the structure of exchange; the misplaced emphasis on legal forms of relationship governance; the subjective nature of 'cost' in some situations, and the importance of the identity of the contracting parties under different modes of exchange.

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