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1 – 10 of over 7000Transaction cost economics (TCE) has received extensive attention from a variety of disciplines, but it holds a particularly central place in strategic management. The focal…
Abstract
Transaction cost economics (TCE) has received extensive attention from a variety of disciplines, but it holds a particularly central place in strategic management. The focal issues examined by TCE, vertical integration and interfirm governance (including contract design), are important determinants of firm performance – the central issue in the field of strategy. While several extensive reviews of empirical work in TCE have been undertaken, one key issue has received relatively little attention – construct validity in TCE empirical research. The purpose of this chapter is to highlight some of the challenges of operationalizing key transaction cost predictions and provide some ideas for better measuring core constructs such as asset specificity, uncertainty, and frequency.
Feihu Zheng, Hao Jiao, Junyi Gu, Hwy-Chang Moon and Wenyan Yin
This study aims to examine how different modes of knowledge flows affect the changes of asset specificity and how ownership control moderates the relationship between knowledge…
Abstract
Purpose
This study aims to examine how different modes of knowledge flows affect the changes of asset specificity and how ownership control moderates the relationship between knowledge flows and asset specificity in the open innovation paradigm.
Design/methodology/approach
This paper selects information technology outsourcing as the research base. It uses the feasible weighted least squares modeling method for its analysis and has collected the data from 2,369 research and development contracts of multinational vendor firms in China.
Findings
The coupled and outbound knowledge flows have a direct and positive effect on asset specificity. Moreover, the results show that weak corporate control has significant moderating effects on the relationship between both coupled and outbound knowledge flows and asset specificity; the strong control positively moderates the relationship between outbound knowledge flows and asset specificity.
Practical implications
In open innovation, firms build a higher degree of asset specificity to maximize the efficiency of knowledge flows, which then helps them to enhance innovation capacity and market performance.
Originality/value
Preceding studies have tended to examine the influences of asset specificity as an independent variable in a closed innovation paradigm. Asset specificity is hence often left as the antecedent “black box.” This paper, however, opens the “black box” of asset specificity, which is set as a dependent variable, by investigating the influences of knowledge flows on the asset specificity in the context of open innovation. It also reinterprets the role of asset specificity by adopting the lens of open innovation theory.
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Tomás F. Espino‐Rodríguez, Pei‐Chun Lai and Tom Baum
This work analyses make or buy decisions from the transaction cost economics perspective and the resource‐based view of the firm. The aim is to analyse the extent to which the…
Abstract
Purpose
This work analyses make or buy decisions from the transaction cost economics perspective and the resource‐based view of the firm. The aim is to analyse the extent to which the presumptions of the two theories are valid in the service sector in terms of specific assets.
Design/methodology/approach
The study was conducted on a representative sample of hotels in Scotland, UK. Each of the surveyed hotels was asked for information about 13 operations or hotel processes. A comprehensive model is developed that establishes the relationship between asset specificity and operation performance and hotel or business performance, moderated by the form of governance (make or buy). Moreover, the relationship between asset specificity and outsourcing in the hotel sector is also examined. The different hotel processes are classified according to the asset specificity. The factors that could lead to an increase in the outsourcing strategy are also analysed.
Findings
The results indicate that, the relationship between asset specificity and operation performance is weaker when the operations are executed in‐house. In the case of the relationship between specific assets and performance, the findings regarding non‐financial performance are not contradictory since it is slightly higher when the operation is outsourced. The factors determining an increase in outsourcing would be those related to the quality of the operation and to non‐financial performance.
Research limitations/implications
Previous studies have not considered the relationship between specificity and business performance, which gives extra incentive to complement and expand the literature on service operations. Future research should analyze other theories on organisations and outsourcing. The findings should also be tested in other geographical regions and use sources of information other than the hotel managers.
Practical implications
The work generates knowledge and aids managers in their “make or buy” decisions for the principal processes in the hotel industry according to the asset specificity.
Originality/value
The paper develops a specificity‐outsourcing matrix and identifies each of the hotel operations. Apart from testing the model in the hotel sector, which is an important sector of the service industry, the work offers a better understanding of outsourcing decisions based on the two basic theories used in the literature on services management. The paper also makes an innovative contribution by analysing relationships between operation specificity and performance that are previously untested in the service sector.
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To apply Williamson's six dimensional typology of asset specificity as a theoretical framework for appraising the nature of outsourcing activities in hotels.
Abstract
Purpose
To apply Williamson's six dimensional typology of asset specificity as a theoretical framework for appraising the nature of outsourcing activities in hotels.
Design/methodology/approach
Interviews with senior managers in large hotels.
Findings
Site specificity and brand capital appear to be the most pertinent dimensions of asset specificity in the sample investigated. Most observations support the transaction cost economics (TCE) prescription that high asset specificity results in insourcing.
Research limitations/implications
This study suffers from the normal shortcomings associated with fieldwork based on a limited sample of observations. Rather than attempting to make generalisable assertions, the study provides an exploration of the ways that asset specificity might manifest itself in hotel outsourcing decision making.
Practical implications
Asset specificity represents an important construct that should be considered when considering whether to outsource. It also provides a valuable context when considering the motivations of parties entering into a subcontracting arrangement.
Originality/value
No study applying either the asset specificity notion or the broader TCE theory has been found in the hospitality management literature. Also, there is a lack of prior research concerned with outsourcing in the hotel sector.
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E-Trade (paperless trade or cross-border e-commerce in B2B format) does not necessarily show positive results. The purpose of this paper is to conceptualize why and how such…
Abstract
Purpose
E-Trade (paperless trade or cross-border e-commerce in B2B format) does not necessarily show positive results. The purpose of this paper is to conceptualize why and how such happens and furthermore, has two research purposes. First is to explain why studies in e-Trade performance show controversial results, such as some showing positive while others are not. Second is to investigate the relationship among research constructs such as e-Trade benefits, e-Trade use, asset specificity, and exporting firm’s capability.
Design/methodology/approach
This study considers multiple dimensions and evolutionary perspective of e-Trade performance. Structural equation model adopts the measures of firm’s capability, e-Trade use, and benefits to analyze e-Trade performance. Performance was divided into organizational net benefits (ONB) and industrial net benefits. Several hypotheses were suggested to test the relationship among the variables in the model. Basic moderator effect represented as an interaction between asset specificity and other constructs. In total, 295 exporting firms have participated in the survey and their responses were utilized for analysis.
Findings
This study shows that e-Trade performance should consider maturity as well as multiple stages among constructs. Critical paths were found among capability factors, process use (PU), ONB, and asset specificity. Results also show that information capability and marketing capability (MC) are determinant factors on e-Trade performance. In addition, MC and level of PU are read to be determinant factors of ONB. Furthermore, small and medium-sized enterprises’ (SMEs’) asset specificity, with level of capability and e-Trade use moderates their e-Trade performance.
Research limitations/implications
Asset specificity of SMEs has to be managed in a positive direction. Government’s e-Trade supporting programs for SMEs should be transformed in a way that can foster the growth of capability and self-sustainment. It reads to be inevitable to amend the current characteristics of e-Trade services. Furthermore, developing a specialized e-Trade service for large firms will also be in need. And utilizing exporting firm’s financial data would be more advisable testing the hypotheses.
Originality/value
Most works in information system as well as in e-Trade area report controversial performance results and this paper suggests an alternative model by combining asset specificity into capability and e-Trade use. Study on e-Trade performance is complicated and needs to consider multiple dimensions as well as their stages. This study envisions firm’s capability, asset specificity and at the same time contributes in e-Trade benefits.
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Wen-Hong Chiu, Zong-Jie Dai and Hui-Ru Chi
This study aims to explore how manufacturing firms master customer lock-in through value creation by servitization innovation strategies from the perspective of asset specificity.
Abstract
Purpose
This study aims to explore how manufacturing firms master customer lock-in through value creation by servitization innovation strategies from the perspective of asset specificity.
Design/methodology/approach
A multiple case study with triangulation fashion is adopted to identify servitization innovation strategies. Several manufacturing firms were investigated, which are distributed in different positions of the value chain. Content analysis and abductive approaches are adopted to analyze the data. Moreover, an in-depth interview and participatory observation were conducted to refine the analysis results.
Findings
This study identified four different focusing points of servitization operations. Based on these, the paper further induces an innovative servitization strategy matrix of customer lock-in, concerning communion, intellectual, existential and insubstantial strategies. Furthermore, a conceptual model of customer lock-in by servitization innovation from the perspective of asset specificity is elaborated. It is suggested that companies can use tangible or intangible resources by sharing or storing operations to create servitization value.
Originality/value
This study theoretically proposes a conceptual model to extend servitization innovation as an intangible asset and adopt the new perspective of asset specificity to illustrate the value creation in servitization to generate customer lock-in.
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Eric La Lau, Michel A. van der Laan, Anne-Marie Kruis and Roland F. Speklé
This chapter provides evidence on the factors that influence the design of the control arrangements that govern support services. Specifically, we study sourcing decisions of…
Abstract
This chapter provides evidence on the factors that influence the design of the control arrangements that govern support services. Specifically, we study sourcing decisions of non-strategic information technology (IT) support services. While the popular management literature suggests to outsource non-strategic activities, in practice organizations perform these services (partly) in-house. Based on transaction cost economics (TCE), we hypothesize that control structure choices depend on asset specificity, uncertainty and frequency. Using survey data on IT sourcing decisions from 89 firms in the construction industry, we find support for most of our hypotheses. Our results indicate that asset specificity deriving from the degree of organizational embeddedness of the IT function negatively affects firms’ propensity to outsource their non-core IT support, and that (behavioural) uncertainty intensifies this negative effect. As expected, we also find that frequency has a negative direct effect on the willingness to outsource IT services provision. However, we find no support for the hypothesized interaction between asset specificity and frequency. Overall, our study indicates that the organization's choice to outsource non-strategic support services depends on the organizational role of these services, rather than on their technological characteristics.
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Nakayima Farida, Ntayi Joseph, Namagembe Sheila, Kabagambe Levi and Muhwezi Moses
This study investigates how asset specificity, relational governance and firm adaptability relate with supply chain integration (SCI), considering selected food processing firms…
Abstract
Purpose
This study investigates how asset specificity, relational governance and firm adaptability relate with supply chain integration (SCI), considering selected food processing firms (FPFs) in Uganda.
Design/methodology/approach
This study applies a quantitative research methodology. This research draws on a sample of 103 FPFs that have been selected from a population of 345 FPFs located in Kampala district. Hypothesis testing was done using Smart PLS version 3.
Findings
Asset specificity has a significant positive relationship with SCI, and firm adaptability partially mediates this relationship. Also, there is a full mediation impact of firm adaptability on the relationship between relational governance and SCI.
Research limitations/implications
This study focused on perceptual measures to get responses from managers on the level of integration with key suppliers and customers, yet firms deal with a number of suppliers and customers.
Originality/value
This study contributes to existing literature on SCI by applying the transaction cost theory. The study focuses on the influence of asset specificity, relational governance and firm adaptability on SCI in the food processing sector. Literature on relational governance in supply chain using the transaction cost theory remains scanty. Few studies have also focused on firm adaptability as a mediator in the FPS with specific focus on Uganda, yet the sector is highly faced with uncertain events. The uncertain events in the sector and in developing countries call for adaptive strategies. Additionally, this study is the first to use firm adaptability to mediate the influence of asset specificity and relational governance on SCI more so in a developing country like Uganda where the FPS is one of the most important in the economy.
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Woodrow W. Cushing and Daniel E. McCarty
This study develops a model for estimating an index measure of asset specificity based on the liquidation value of corporate firms and the proportional distribution of their…
Abstract
This study develops a model for estimating an index measure of asset specificity based on the liquidation value of corporate firms and the proportional distribution of their pre‐liquidation assets. A statistically significant positive relationship was found to exist between the estimated specificity index and financial leverage supporting the theoretical prediction. Additional evidence was found that firms with higher variability in sales, lower probabilities of failure, higher valued non‐debt tax shields and higher levels of financial slack use less financial leverage.
Constantine Bourlakis and Michael Bourlakis
To investigate the evolutionary process of the retail logistics network formation, and to propose a relationship framework between the logistics asset buyer (the retailer) and the…
Abstract
Purpose
To investigate the evolutionary process of the retail logistics network formation, and to propose a relationship framework between the logistics asset buyer (the retailer) and the logistics asset supplier (the third‐party logistics firm).
Design/methodology/approach
The evolutionary process is based on the way the asset specificity element of transaction costs theory can be perceived by the logistics asset buyer and the logistics asset supplier. The asset specificity element is linked to both network and buyer‐supplier relationship theories with the aim of conceptualising a buyer‐supplier relationship framework. Secondary data for the UK food retail chain are also employed.
Findings
A new relationship framework is developed based on the buyers’‐suppliers’ perceptions in relation to logistics asset specificity, and the conditions required for the formation of the retail logistics network are illustrated. If transaction costs are perceived as high by both the buyer and the supplier of a logistics asset, the retailer will engage into a fourth‐party logistics network formation where the use of information technology systems is of critical importance. At this stage, these systems will become the primary co‐ordination device for the reduction and absorption of complexity in the retail chain.
Originality/value
The paper offers a unique buyer‐supplier partnership framework by proposing that the formation of a fourth‐party logistics network will decrease the complexity of modern retail logistics operations. The paper will assist retail managers responsible for the development of logistics strategies and will be beneficial to researchers examining logistics and supply chain management operations.
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