IDEAS home Printed from https://ideas.repec.org/a/taf/defpea/v15y2004i3p205-219.html

Outsourcing Military Force: A Transactions Cost Perspective on the Role of Military Companies

Author

Listed:
  • Eric Fredland

Abstract

Since the mid-1990s, the operations of private, for profit, military companies have been the subject of increased political and media scrutiny. Firms in this industry provide both combat and support functions to sovereign governments. In this paper, the current and potential future role of these companies is examined from the perspective of transactions cost economics. The transactions cost approach suggests that inevitable contractual hazards sharply limit the combat/combat support role of these companies, despite substantial potential cost savings, even for poor countries with weak governments. However, there is a growing market, even in developed countries, for private provision of training and support.

Suggested Citation

  • Eric Fredland, 2004. "Outsourcing Military Force: A Transactions Cost Perspective on the Role of Military Companies," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(3), pages 205-219.
    • Handle: RePEc:taf:defpea:v:15:y:2004:i:3:p:205-219
    DOI: 10.1080/10242690310001623410
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/10242690310001623410
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10242690310001623410?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 306-342, April.
    2. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
    3. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1127-1161.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bennedsen, Morten & Schultz, Christian, 2011. "Arm's length delegation of public services," Journal of Public Economics, Elsevier, vol. 95(7), pages 543-552.
    2. MacDonald, Peter, 2013. "Labour substitution and the scope for military outsourcing," MPRA Paper 46688, University Library of Munich, Germany.
    3. Goel, Rajeev K. & Saunoris, James W., 2014. "Military versus non-military government spending and the shadow economy," Economic Systems, Elsevier, vol. 38(3), pages 350-359.
    4. Renaud Bellais & Martial Foucault & Jean-Michel Oudot, 2014. "Économie de la défense," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01052607, HAL.
    5. repec:rnp:ppaper:mn47 is not listed on IDEAS
    6. Morten Bennedsen & Christian Schultz, 2007. "Arm’s Length Provision of Public Services," CIE Discussion Papers 2007-12, University of Copenhagen. Department of Economics. Centre for Industrial Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giorgio Zanarone, 2012. "Coase (1937) revisited: Endogenous fiat in firms and markets," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(2), pages 201-221, July.
    2. Mehdi Shiva & Clare FitzGerald & Eleanor Carter & Mara Airoldi, 2024. "Beyond “make” or “buy”: Evaluating value‐for‐money in public service delivery," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(4), pages 1171-1196, December.
    3. Xavier Fageda & Germa Bel, 2008. "Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain," IREA Working Papers 200804, University of Barcelona, Research Institute of Applied Economics, revised Apr 2008.
    4. Zarco-Jasso, Hugo, 2005. "Public-private partnerships: A multidimensional model for contracting," IESE Research Papers D/584, IESE Business School.
    5. Jason Coupet & Abagail McWilliams, 2017. "Integrating Organizational Economics and Resource Dependence Theory to Explain the Persistence of Quasi Markets," Administrative Sciences, MDPI, vol. 7(3), pages 1-13, August.
    6. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889, December.
    7. Peeter Peda & Giuseppe Grossi & Margo Liik, 2013. "Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 237-259, May.
    8. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    9. Sandro Cabral & Joseph T. Mahoney & Anita M. McGahan & Matthew Potoski, 2019. "Value creation and value appropriation in public and nonprofit organizations," Strategic Management Journal, Wiley Blackwell, vol. 40(4), pages 465-475, April.
    10. Oliver Hart, 2008. "Economica Coase Lecture: Reference Points and the Theory of the Firm," Economica, London School of Economics and Political Science, vol. 75(299), pages 404-411, August.
    11. Garrouste, Pierre & Saussier, Stephane, 2005. "Looking for a theory of the firm: Future challenges," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 178-199, October.
    12. Schmidt, Klaus, 2017. "The 2016 Nobel Memorial Prize in Contract Theory," Rationality and Competition Discussion Paper Series 19, CRC TRR 190 Rationality and Competition.
    13. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    14. Bertrand V. Quélin & Ilze Kivleniece & Sergio Lazzarini, 2017. "Public-Private Collaboration, Hybridity and Social Value: Towards New Theoretical Perspectives," Journal of Management Studies, Wiley Blackwell, vol. 54(6), pages 763-792, September.
    15. Desrieux, Claudine & Chong, Eshien & Saussier, Stéphane, 2013. "Putting all one's eggs in one basket: Relational contracts and the management of local public services," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 167-186.
    16. Phillip Toner, 2014. "Contracting out publicly funded vocational education: A transaction cost critique," The Economic and Labour Relations Review, , vol. 25(2), pages 222-239, June.
    17. Andersson, Fredrik, 2004. "A Trickle-Down Theory of Incentives with Applications to Privatization and Outsourcing," Working Papers 2004:13, Lund University, Department of Economics.
    18. Schmitz, Patrick W., 2015. "Government versus private ownership of public goods: The role of bargaining frictions," Journal of Public Economics, Elsevier, vol. 132(C), pages 23-31.
    19. Ilya Segal & Michael D.Whinston, 2012. "Property Rights [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    20. Macauley, Molly & Walls, Margaret & Anderson, Soren, 2002. "The Organization of Local Solid Waste and Recycling Markets: Public and Private Provision of Services," RFF Working Paper Series dp-02-35-rev, Resources for the Future.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:defpea:v:15:y:2004:i:3:p:205-219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/GDPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.