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Uncertainty means that transaction costs have to be incurred by organisations whenever they make an agreement. These costs include time and money spent searching, drawing up and enforcing contracts and in dealing with contingencies. The concept of transaction costs is traced from its originator, economist Ronald Coase, to its more recent development by David Kreps. Good reputations, themselves a product of successful corporate communications activities, tend to reduce internal and external transaction costs. Given a competitive environment those firms with lower transaction costs, as a result of high reputations, will tend to survive better than those with weak ones.

Practitioners often are confused by theories that offer ambiguous prescriptions for designing the institutional forms or governance structures in which business activities are conducted. Unclear prescriptions for organizing tasks within the main governance alternatives leave key design decisions unguided: which tasks to perform in‐house (hierarchy), which to contract to outside agencies (market), and which to perform jointly by economic units within and outside the firm (hybrid)? A popular current theory ‐ transaction cost analysis ‐ suggests that governance structures should be aligned to tasks in a “mainly transaction cost economizing way.” Argues that the importance of transaction costs is overstated, and that observed patterns of firms’ governance structures suggest that firms also account for other theoretical issues ‐ production costs and strategic considerations ‐ in determining efficient boundaries. Begins by illustrating that transaction costs are not always primary. Then discusses the factors that impact production costs and transaction costs, and reviews certain strategic considerations that impact the choice of governance structure for a task. Offers practitioners guidance in choosing governance structures through a contingency analysis that examines the interaction of production costs, transaction costs, and strategic considerations. Illustrates normative implications for designing governance structures through corporate examples that are driven by both cost and strategy considerations.

The purpose of this paper is to examine the transaction costs involved in managing procurement contracts in the public sector, particularly at the lower and higher level of local governments from the clients’ perspective.

The paper uses new institutional economics, specifically the transaction cost approach. A multiple case study design was used, in which five local government authorities (LGAs) were selected from the Kigoma and Tanga regions of Tanzania. Interviews with heads of procurement management units, focus groups and secondary sources were used to collect information for lower level LGAs.

Very high information, negotiation and monitoring transaction costs were revealed at the post-contractual stage for higher levels of local government in all cases. Transaction costs were associated with institutional problems, lack of financial resources and attitudes towards accountability, transparency and competition. It was also found that lower levels of local government are faced with very high transaction costs for all procurement stages due to a lack of procurement contract management capacity among ward and village procurement project committees, low levels of support from higher level LGAs, a lack of simple Swahili-standardised documents and guidelines for lower level procurement contract management which reflect current legal issues and the lack of a legal framework for procurement at the lower level of local government. These costs are associated with poor accountability and a lack of competition, transparency and efficiency throughout public procurement chains.

There is no estimate for quantitative approaches, because it is was difficult to measure transaction costs associated with accountability, transparency and efficiency.

The paper contributes knowledge on qualitative levels of transaction costs for procurement contract management for both higher and lower levels of LGAs from the clients’ viewpoint.

Outsourcing is now a common strategy for delivery of property services. Recent reviews of empirical literature find support for the efficiency and cost savings from outsourcing is at best mixed. In the housing context, organizations are still sceptical to the real cost benefit and are reluctant to enter into multiyear outsourcing contracts to deliver their housing management and facilities services. This study aims to investigate whether outsourcing can bring significant cost savings to housing services, and if so to explore how the transaction process should be structured in order to optimize the transaction value through minimization of production and transaction costs.

Single‐case study methodology, based on a typical major housing corporation in Hong Kong, was used to quantitatively examine the impact of outsourcing on cost savings using independent‐samples t‐test, and competition on fees (production cost) using Pearson correlation analysis. Pearson analysis was also conducted to examine the correlation between the levels of transaction costs and the degrees of complexity of housing services.

The quantitative study found that outsourcing could lead to significant cost savings for housing services in a contestable property service market. The levels of competition had significant negative correlation with the tendered prices, inferring that more competent bidders should be invited for competitive tendering to minimize production cost. Complex services with intensive resident involvement and uncertain scope of works were associated with high monitoring costs, inferring that monitoring resources should be allocated according to the complexity of services to minimize transaction costs. This approach can ensure optimization of transaction value, which is particularly relevant to high‐density developments requiring high transaction costs for performance monitoring of the outsourced housing services.

Whilst cost savings and transaction structure for optimization of transaction value are verified in the context of a representative major housing organization, the results form a baseline on which further research can build to test their significance in many other settings. Ultimately, a more robust transaction value theory can be developed for outsourcing of housing services.

With the findings of this research, housing organizations can make an informed decision to outsource the services. They can also adopt the transaction structure to optimize transaction value from outsourcing, i.e. minimization of production and transaction costs through market competition and allocation of monitoring resources based on the complexity of services.

This study makes economic contribution to corporate outsourcing policy by establishing a transaction structure which policy makers and facilities managers can adopt to optimize cost savings. Consequently, this will benefit the society through optimal use of resources.

Further understanding of structural hierarchy is critically needed to assess the usefulness of different alliance structures. This study goes beyond transaction cost reasoning and incorporates social exchange theoretic perspective with the aim of capturing the concurrent relationships of alliance type and specific alliance experience with hierarchy of alliance structure.

Logistic regression analysis of data on 402 strategic alliances is used to test the two hypotheses advanced in the paper.

The social‐exchange‐based hypothesis is supported – specific alliance experience is negatively related to hierarchy of alliance structure. The transaction‐cost‐based hypothesis is not supported – hierarchy of alliance structure is not greater in horizontal alliances than in vertical alliances.

Strategic alliances with different purposes, such as R&D, supply procurement, marketing, co‐production, and co‐development, may have different industry norms of structuring alliances. This study does not account for these underlying differences within strategic alliances.

The social exchange theory‐based variable (i.e. specific alliance experience) has a more salient influence on alliance structure than does the transaction cost‐based variable (i.e. alliance type). The findings signal the relative importance of communal harmony compared to competitive rivalry.

The paper shows that results suggest that high bureaucratic costs of more hierarchical structures diminish the transaction cost economizing benefits of such structures. This is especially the case when alliances are not expected to experience very high levels of relational hazards (usually in vertical alliances). It appears that partnering firms' concerns with high bureaucratic costs may at times exceed the marginal benefits of control and coordination of exceedingly hierarchical alliance structures.

Observes that supply chain management is a rapidly‐evolving subject which offers many insights into how industries are organized and into the efficiency gains which can be made under different organizational structures, pointing out that it is an interdisciplinary concept, drawing on aspects of marketing, economics, logistics, organizational behaviour, etc. Presents a framework from the economics literature which may be useful for those interested in understanding and exploring the concept of supply chain management. Describes the origins and development of transaction cost analysis and explains the key concepts of the framework. Discusses the potential effects of transaction costs on vertical co‐ordination within an industry and, hence, on supply chain management. Finally, suggests methods for empiricizing transaction cost analysis, resulting in recommendations for closer co‐operation between researchers and business managers.

The basic concept of transaction cost theory is that firms like to conduct transactions in a channel with lower transaction costs. Therefore, the purpose of this paper is to use the transaction cost perspective to identify which conditions cause companies to choose between outbound open innovation (hierarchy governance) and inbound open innovation (market governance).

Accordingly, transaction cost economics was used to relate the choice and implementation of open innovation using a sample of 250 electronics and information start-ups in China. Structural equation modeling was used to conduct confirmatory factor analysis to evaluate measurement model, while logistic regression analysis was used to test the hypotheses.

As expected, the dedicated asset specificity, human asset specificity, behavioral uncertainty, transaction frequency, and small number exchange were positively associated with outbound open innovation.

The contribution of this paper lies in explaining the role played by transaction cost economics in the process of open innovation for start-ups through empirical analysis.

The purpose of this paper is to weigh the benefits and costs of public property, as opposed to private, from the transaction cost perspective. In the absence of transaction costs, private property has clear advantages over public. However, when the true costs of running an economic system are taken into account, the advantages of private property are not so evident and public property may turn out to be the preferred form of ownership. The paper shows that in high-transaction cost sectors and economies such as the newly emerging markets in Eastern Europe, public property is a cheaper way of organizing economic activities, as it can save on transaction costs. The paper demonstrates these virtues of public ownership in relation to market failure, the provision of public goods, natural monopolies and competitive industries with a high degree of market uncertainty, opportunism and asset specificity.

A qualitative paper discussing the advantages of public over private property in the presence of high-transaction costs.

Studying different types of market failure the paper finds that public property is advantageous to private in high-transaction cost systems.

Since most of the standard literature emphasizes the advantages of private property, the paper gives an economic explanation to those of public property taking on a new institutional approach and conducting a transaction cost analysis.

This paper investigates the transaction decoupling phenomenon in purchase and consumption of football match tickets. The theoretical approach describes several economical constructs behind individual decision-making behaviour, including sunk costs, mental accounting and coupling. Results indicate that people who buy bundled tickets are less likely to use their tickets than those who purchase individual ones. Furthermore, the phenomenon proved to be a valid theory in an actual Brazilian football ticket purchase and consumption scenario, confirming that rational elements can also be part of sports consumption. Thus, it can be stated that the type of purchase (bundle or single tickets) influences consumer decision-making.

Classical transaction cost theory is not applicable to decisions on HRM or organizational design. This article overcomes such a fruitless situation. First on an operative level the two types of HRM and separately organizational transaction costs will be analyzed and then linked together in a substitutive or cumulative way. Second, transaction cost analysis is extended to the higher level of strategic HRM and organization design. There both types of transaction costs are linked again. Furthermore, they control types and size of HRM and organizational transaction costs on the operative level. As a decision base consequently both levels and both types of transaction cost should be analyzed and determined simultaneously.