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Procurement: The Transaction Costs Perspective in a Globalising World

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  • Frank A.G. den Butter

    ()
    (VU University Amsterdam)

Abstract

Fragmentation of production into more and more complex supply chains is a prominent feature of globalisation. It implies that transaction costs as part of total costs of ownership carry a large weight in procurement decisions. An analysis of the various types of transaction costs is also essential in the “make or buy” and location decisions in global sourcing. A distinction can be made between “hard” and “soft” transaction costs. Soft transaction costs are difficult to quantify but become more important in strategic business decisions now that formal trade barriers gradually disappear and transport costs are reduced. Business strategies to keep transaction costs low in the long run can also, to a considerable extent, explain socially responsible business conduct from the perspective of rational economic behaviour.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-091/3.

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Date of creation: 23 Nov 2007
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Handle: RePEc:dgr:uvatin:20070091

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Web page: http://www.tinbergen.nl

Related research

Keywords: procurement; outsourcing; transaction costs; managing transactions; orchestrating the supply chain;

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  1. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-68, June.
  2. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  3. Jagdish Bhagwati, 2007. "Why The Critics Of Globalization Are Mistaken," De Economist, Springer, vol. 155(1), pages 1-21, March.
  4. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
  5. Johan Graafland & Corrie Mazereeuw-Van Der Duijn Schouten, 2007. "The Heavenly Calculus and Socially Responsible Business Conduct: An Explorative Study among Executives," De Economist, Springer, vol. 155(2), pages 161-181, June.
  6. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  7. Cornia, Giovanni Andrea (ed.), 2004. "Inequality, Growth, and Poverty in an Era of Liberalization and Globalization," OUP Catalogue, Oxford University Press, number 9780199271412, September.
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