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Strategic disruption and transaction cost economics: The case of the American auto industry and Japanese competition

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  • Averyt, William F.
  • Ramagopal, K.

Abstract

This paper develops the concept of strategic disruption using the insights of Transaction Cost Economics (TCE). Firms attack competitors by shaping government rules in order to produce misalignment of competitors' transactions and governance structures. Strategic disruption is illustrated by the case of American automobile producers in their struggle against Japanese competitors over the last two decades. The Americans' use of strategic disruption relied on a two-pronged approach. The first approach involved local content provisions and the second approach involved rules of origin in the North American Free Trade Agreement (NAFTA). These two tactics forced the Japanese producers to realign their transactions and governance structures, turning to second-best alternatives. Strategic disruption provides a new way of thinking about strategic entry barriers whereby government rules alter competitors' decisions because it changes their transaction cost configuration.

Suggested Citation

  • Averyt, William F. & Ramagopal, K., 1999. "Strategic disruption and transaction cost economics: The case of the American auto industry and Japanese competition," International Business Review, Elsevier, vol. 8(1), pages 39-53, January.
    • Handle: RePEc:eee:iburev:v:8:y:1999:i:1:p:39-53
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    References listed on IDEAS

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    Cited by:

    1. Xiao, Tiaojun & Yu, Gang, 2006. "Supply chain disruption management and evolutionarily stable strategies of retailers in the quantity-setting duopoly situation with homogeneous goods," European Journal of Operational Research, Elsevier, vol. 173(2), pages 648-668, September.
    2. Eden, Lorraine & Molot, Maureen Appel, 2002. "Insiders, outsiders and host country bargains," Journal of International Management, Elsevier, vol. 8(4), pages 359-388.
    3. Seyoum, Belay, 2007. "Trade liberalization and patterns of strategic adjustment in the US textiles and clothing industry," International Business Review, Elsevier, vol. 16(1), pages 109-135, February.

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