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The Make-or-Buy Decision in the Croatian Shipbuilding Industry: A Transaction Cost Economics Approach

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  • Sergio Ermacora

    (Independent Researcher, Bosnia & Herzegovina)

  • Senada Smajić

    (LSE Consortium Sarajevo, Bosnia & Herzegovina)

Abstract

This paper examines the make-or-buy decision in the Croatian shipbuilding industry using a Transaction Cost Economics Approach. In other words, shipyards' decision to ‘make’ a component or to ‘buy’ it from market firms is analysed in relation to certain characteristics of the transactions in order to assess whether this decision is made in accordance with the theory's predictions.The empirical investigation, which is based on a sample of 167 observations, suggests that transaction cost hypotheses are only partially confirmed. Namely, while physical asset specificity and complexity are likely to increase the probability that a transaction will be internalised, temporal asset specificity and frequency seem not to affect significantly the integration decision. However, as the analysis leaves much of the variance in the patterns of vertical integration unexplained, the finding presented in this study should be seen as tentative. The inclusion of the remaining shipyards in the analysis as well as of new and more variables in the model are likely to improve the reliability of the results.

Suggested Citation

  • Sergio Ermacora & Senada Smajić, 2009. "The Make-or-Buy Decision in the Croatian Shipbuilding Industry: A Transaction Cost Economics Approach," South East European Journal of Economics and Business, Sciendo, vol. 4(1), pages 81-105, April.
    • Handle: RePEc:vrs:seejeb:v:4:y:2009:i:1:p:81-105:n:6
    DOI: 10.2478/v10033-009-0006-3
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    Cited by:

    1. Shastitko, Andrei (Шаститко, Андрей) & Golovanova, Svetlana (Голованова, Светлана), 2014. "Competition issues in the procurement of capital-largest consumer products (lessons of antitrust case) [Вопросы Конкуренции В Закупках Капиталоемкой Продукции Крупным Потребителем (Уроки Одного Ант," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 67-89.
    2. Andrei Y. Shastitko & Svetlana V. Golovanova, 2014. "Collusion in markets characterized by one large buyer: lessons learned from an antitrust case in Russia," HSE Working papers WP BRP 49/EC/2014, National Research University Higher School of Economics.

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