The perspective of transaction cost economics
The perspective of transaction cost economics regards the managing of exchanges in efficient ways with the lowest cost of governance, where the concepts of transaction costs, transaction attributes, and governance structures are key elements. Transaction attributes concerns asset specificity, transactions frequency and the uncertainty surrounding the ex9 change (Williamson, 1975). Transaction cost theory view economic exchange as a question of designing and maintaining a relationship and mechanisms to control that exchange (Izquierdo & Cillán, 2001). This two-sided view of collaboration is called relational contracting.
Reflecting on this, Izquierdo and Cillán (2001) view relational firms as having a hybrid structure, partly dependent and partly controlling. The choice of hybrid structure (i.e. the degree of control and degree of dependence) is dependent on the investments made in transaction specific assets, the uncertainty and the frequency of transactions. Williamson (1985), being the first to mention this hybrid governance (Proven & Gassenheimer, 1994) views these three factors as sources of dependence, all making it difficult to replace the exchange partner. Transaction cost analysis see the relationship as a way to stabilize the economic exchange and the risk of opportunistic behavior, as it is structured by informal and formal bonds (Pfeffer & Salancik, 1978).
Investments being made in respect to a certain exchange relationship that cannot be used in another context are transaction specific. The assets from such investments are said to have a high degree of asset specificity if the risk of sacrificing value is high if the relationship is terminated. Also human assets can be transaction specific. The transaction specific investments made in a relationships shape the stake a firm has towards another firm (Williamson, 1985).
The uncertainty is described as the disturbances surrounding the exchange which can be environmental of time and place. Uncertainty can also be internal to the transaction, and a result of human actions or lack of actions. Bounded rationality, described below, is the reason that these uncertainties become concerns and lack of communication is exemplified as a human behavior that can increase uncertainty (Williamson, 1985).
As complexity, specialization or asset specificity of firms in a transaction relationship increase, so does the cost of governing it. Increased frequency of transactions and the transaction scope will assist in making these specializations possible but also affect the dependence situation (Williamson, 1985).
Transaction cost economics rely on a number of behavioral assumptions that need introduction. The seeking of rationality and uncertainty reduction of firms are straightforward, hile the concept of bounded rationality is less intuitive. Bounded rationality means that firms try to act rational but only does so to a limited extent, because of the limited ability to do so since information upon which to establish these fully rational actions is limited (Williamson,1985). Bounded rationality and uncertainty make it difficult to determine honest organizations from those acting (or those that will act) of pure self-interest (Howard & Squire, 2007), thus the risk of opportunistic behavior is another assumption of transaction cost economics (Williamson, 1985).
The strategic management perspective
Within strategic management the so called resource-based theory concerns the managing of resources as to increase the competitive advantage of the organization, in relation to the market (Vivek, Banwet & Shankar, 2007). The resource-based view implies that a company’s performance is dependent on its ability to accumulate resources (assets, information, knowledge, capabilities, processes etc.) that are valuable, rare, difficult to imitate, and difficult to substitute. Resources showing all of these four characteristics should be viewed as a possible source of sustainable competitive advantage (Barney, 1991). On the interorganizational level, relationships are seen as ways to collect tangible and intangible resources (Vivek et al., 2007) where the possible sources of competitive advantage take the shape of knowledge sharing, complementary capabilities, relational governance, and trans10 action specific assets (Dyer & Singh, 1998). Also the resource based view thus highlights the possibility that resources can be firm or relationship specific.
Resources create dependencies to firms when being important, when control over resources are rather concentrated or when they are both. Being important can be shown in the proportion of sales/purchases firm commit to each other or when alternative resources are lacking, should the access to the resource be removed. However, even though proportion of business committed to the other firm may be large, the resource criticality may not be high.
The importance of a resource is also determined by the firm’s ability to function without the resource (Pfeffer & Salancik, 1978). Hence, also a resource of small magnitude can be critical to a firm’s endeavors.
1.2 Development and identification of problem
1.3 Purpose and research questions
2 Theoretical framework
2.1 Supply Chain Collaboration
2.2 Inter-organizational dependence
2.4 Dependence and Power .
2.5 Theoretical Conclusion
3.1 Research approach
3.2 Theory selection and categorizatio
3.3 Case study research
3.4 Case selection and definition
3.5 Gathering the empirical materia
3.6 Analysis of empirical findings
4 Presenting the findings
4.1 Case Companies
4.2 Stoeryd AB’s perspective of the relationship
4.3 GGP Sweden AB’s perspective of the relationship
4.4 Stoeryd AB’s elements of dependence
4.5 GGP Sweden AB’s elements of dependence
5.1 Relationship specific asset dimension
5.2 The resource transaction magnitude dimension
5.3 The resource characteristics dimension
5.4 The industry dimension
5.5 The information dimension
5.6 Implications on the relationship
5.7 Dependence and power
5.8 Revising the dimensional framework
6.2 Managerial Implications
6.3 Theoretical implications
6.4 Further research
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The elements of dependence A case study on inter-organizational dependence