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Scale and Transaction Costs in the U.S. Biopower Industry

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  • Altman Ira J

    (Southern Illinois University — Carbondale)

  • Klein Peter G.

    (University of Missouri — Columbia)

  • Johnson Thomas G.

    (University of Missouri — Columbia)

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    Abstract

    With increasing interest in renewable energy from agriculture, including biopower and cellulose ethanol, there is a need for better understanding of the economic organization of this emerging industry. Study of the organization of the biopower industry represents an under-researched area and a new application of transaction cost theory to an emerging industry.Refinement of the theory can also result from challenging applications. This article provides an application of transaction cost economics to the existing United States biopower industry while challenging the empirical convention of excluding production cost variables from transaction cost analysis. Utilizing survey data from 53 biopower generators we study the relationship between physical asset specificity, site specificity, and scale in explaining firms' decisions to procure inputs internally, externally, or to use both methods. Consistent with transaction cost theory, both site specificity and scale are good predictors of organizational form. Given this evidence, this article reconsiders the impact of scale and transaction costs on the choice of organizational from.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 5 (2007)
    Issue (Month): 1 (December)
    Pages: 1-19

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    Handle: RePEc:bpj:bjafio:v:5:y:2007:i:1:n:10

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/jafio

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    Cited by:
    1. Hobbs, Jill E. & Weseen, Simon & Kerr, William A., 2012. "Transaction Costs, Hold-Ups and Governance in Ethanol Supply Chains," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125158, International Association of Agricultural Economists.
    2. Weseen, Simon & Hobbs, Jill & Kerr, William A., 2014. "Reducing Hold-up Risks in Ethanol Supply Chains: A Transaction Cost Perspective," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 17(2).
    3. Altman, Ira J. & Johnson, Thomas G. & Moon, Wanki, . "Organizational Preferences and Producer Characteristics in Biomass Supply Chains," Journal of Agribusiness, Agricultural Economics Association of Georgia.

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