IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Strategy and Transaction Cost Nexus Past Debates, Central Questions, and Future Research Possibilities

  • Nicolai J. Foss

The role of transaction cost economics in developing research in strategy has been a hotly debated topic over the last decade. This paper presents the radical argument that transaction cost insights are more than merely useful complements to existing approaches to strategy. Rather, they are necessary for adequately understanding the nature of strategizing. This is because transaction costs are essential aspects of processes of creating, capturing and protecting value. If transaction costs are zero, these processes do not pose any strategic problems; strategizing is trivialized in such a world. When transaction costs are positive, on the other hand, opportunities for value creation through the reduction of inefficiencies caused by transaction costs exist, and protecting and appropriating value are costly activities that dissipate value. Also, contracting and expectations enter as central aspects of strategizing. Arguments are provided for why economizing (with transaction costs) is more fundamental than strategizing (in the sense of exploiting market power). Thus, the paper argues that models in which the fullest possible account of transaction costs is made be used as the proper foundations and benchmarks for economics-based strategy research, rather than the patched-up competitive equilibrium models that are now used, more or less implicitly, as the benchmark in important parts of strategy research, most notably in the resource-based view.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www3.druid.dk/wp/20020004.pdf
Download Restriction: no

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 02-04.

as
in new window

Length:
Date of creation: 2002
Date of revision:
Handle: RePEc:aal:abbswp:02-04
Contact details of provider: Web page: http://www.druid.dk/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Cynthia A. Montgomery & Birger Wernerfelt, 1988. "Diversification, Ricardian Rents, and Tobin's q," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 623-632, Winter.
  2. Lewin, Peter & Phelan, Steven E, 2000. " An Austrian Theory of the Firm," The Review of Austrian Economics, Springer, vol. 13(1), pages 59-79, February.
  3. Barzel, Yoram, 1994. "The capture of wealth by monopolists and the protection of property rights," International Review of Law and Economics, Elsevier, vol. 14(4), pages 393-409, December.
  4. Henry Ogden Armour & David J. Teece, 1978. "Organizational Structure and Economic Performance: A Test of the Multidivisional Hypothesis," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 106-122, Spring.
  5. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  6. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
  7. Kirsten Foss & Nicolai J. Foss, . "Creating, Capturing and Protecting Value: A Property Rights-based View of Competitive Strategy," IVS/CBS Working Papers 2002-03, Department of Industrial Economics and Strategy, Copenhagen Business School.
  8. Foss, Kirsten, 1996. "Transaction costs and technological development: the case of the Danish fruit and vegetable industry," Research Policy, Elsevier, vol. 25(4), pages 531-547, June.
  9. Brozen, Yale, 1971. "The Persistence of 'High Rates of Return' in High-Stable Concentration Industries," Journal of Law and Economics, University of Chicago Press, vol. 14(2), pages 501-12, October.
  10. Barzel, Y., 1994. "The Capture of Wealth by monopolists and the Protection of Property Rights," Working Papers 94-3, University of Washington, Department of Economics.
  11. Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-63, October.
  12. Giovanni Dosi & Luigi Marengo, 1999. "On the tangled discourse between transaction costs economics and competence-based views of the firms: Some comments," LEM Papers Series 1999/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  13. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  14. Teece, David J., 1982. "Towards an economic theory of the multiproduct firm," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 39-63, March.
  15. Sergiu Hart, 2006. "Shapley Value," Discussion Paper Series dp421, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  16. Joseph M. Ostroy & Louis Makowski, 2001. "Perfect Competition and the Creativity of the Market," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 479-535, June.
  17. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 335-61, October.
  18. Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value-based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, 03.
  19. Barzel, Y., 1994. "The Capture of Wealth by monopolists and the Protection of Property Rights," Discussion Papers in Economics at the University of Washington 94-3, Department of Economics at the University of Washington.
  20. repec:cup:cbooks:9780521597135 is not listed on IDEAS
  21. Winter, Sidney G, 1988. "On Coase, Competence, and the Corporation," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 163-80, Spring.
  22. Thomas N. Hubbard, 2000. "The Demand For Monitoring Technologies: The Case Of Trucking," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 533-560, May.
  23. Nicolai Foss, 1999. "Research in the Strategic Theory of the Firm: 'Isolationism' and 'Integrationism'," Journal of Management Studies, Wiley Blackwell, vol. 36(6), pages 725-755, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:aal:abbswp:02-04. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keld Laursen)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.