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Transaction cost economics is an important anchor for analyzing a wide range of economic and organizational issues and is complemented by various theories, resulting in a perception shift of transaction governance structure from a polar classification toward a continuum (John & Reve, 1982; Heide & Miner, 1992; Hennart, 1993). Despite conceptual framework developments, empirical studies based on the continuum are scarce. This research is an initial effort toward TGS dimensionalization and operationalization and reviews theoretical developments since 1930, surveys empirical studies from 1982 to 2004, presents Williamson’s framework (1991), and proposes a set of items for instrument design.

This paper seeks to incorporate theories from commodity studies, functional studies, institutional studies, and transaction cost economics, to integrate product and process approaches and simultaneously examine the effects of product and process on consumer preferences for online and offline channels.

The study took a systemic approach. It reviewed the existing literature, proposed a theoretical framework, designed and administrated a measurement instrument, analyzed survey results, and provided implications and conclusions.

In addition to the type of product, the type of transaction process has a significant impact on consumer preferences for online and offline channels.

The sample representation was limited to college students. The analysis also assumed the independency of repeated measures on the subjects.

This paper will facilitate managers in designing and choosing transaction channels based on product type and process function type.

This is the first study which examines the impact of both factors – transaction product and transaction process – on channel preference. The transaction process is systemically defined into four sub‐functions and measured accordingly. An instrument is developed and administer to measure consumer preferences for online and offline channels in response to different types of products and different types of process functions. It is the first instrument of this kind.

As companies move their businesses offshore to developing countries, how to estimate market costs and select transaction governance structures (TGS) accordingly has become a challenge. Based on transaction cost theory, the purpose of this paper is to propose that corruption is an influential factor, which can potentially increase market transaction costs and favor selections of hierarchy oriented TGSs.

Data are collected from World Development Indicators database and the Corruption Perception Index 2006. In total, 154 countries are included in the study. A regression analysis is used to demonstrate the correlation between levels of corruption and selections of TGS.

The results indicate a strong correlation between corruption and TGS.

Low labor costs and other incentives should not be the only reasons for moving businesses into developing countries. Managers should take a closer look at levels of corruption and estimate transaction costs accordingly. If a company plans to enter into a highly corrupted environment, it should consider using a hierarchy oriented TGS.

This paper applies transaction cost theory to strategic management of outsourcing and highlights corruption as an unfavorable factor for outsourcing to developing countries.