The Firm as an Inspector: Private Ordering and Political Rules

2009 ◽  
Vol 11 (4) ◽  
pp. 1-32 ◽  
Author(s):  
Adrienne Heritier ◽  
Anna K. Mueller-Debus ◽  
Christian R. Thauer
Keyword(s):  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Environmental Regulations ◽  
Theoretical Argument ◽  
Public Authorities ◽  
Private Ordering ◽  
Production Processes ◽  
Worldwide Production ◽  
Regulatory Standards

With increasing fragmentation of worldwide production chains and the corresponding contracting relations between companies, the “firm as an inspector” has become a frequent phenomenon. Buyer firms deploy supervising activities over their suppliers' products and production processes in order to ensure their compliance with regulatory standards, thereby taking on tasks commonly performed by public authorities. Why would a firm engage in such activities? In this article we will analyze the conditions under which firms play the role of an inspector vis-à-vis their sub-contractor firms to guarantee compliance with quality and environmental regulations. We develop a theoretical argument based on transaction cost economics and institutionalism to offer hypothetical answers to this question and provide an empirical assessment of our hypotheses.

scholarly journals A Focus on ‘Control’: Reconciling Contemporary Transaction Cost Economics with Behavioural Contingency Accounting Perspectives

2019 ◽  
Vol 8 (2) ◽  
pp. 189
Author(s):  
Sarah A. Hinchliffe
Keyword(s):  
Transaction Cost ◽  
Review Paper ◽  
Transaction Cost Economics ◽  
Management Accounting ◽  
Principal Agent ◽  
Control Problems ◽  
Managerial Accounting ◽  
Fields Of Study ◽  
Actual Control

Transaction cost economics and contingency research in managerial accounting currently are approached largely as two formally distinct fields of study.  This brief review paper aims to reconcile the literature on both subjects in so far as possible, by examining broadly their underlying assumptions and reported conclusions with the view towards identifying differences and similarities.  An important integration is achieved by showing that transaction cost economics and the ‘decision influencing’ role of management accounting concentrate essentially on different aspects to a shared concern with organisational control.  However, it additionally is revealed that transaction cost economics does not account adequately for the existence of management accounting’s ‘decision facilitating’ function, and that in comparison to the former the latter’s relatively stronger empirical focus is more suited towards finding potential solutions to the actual control problems which confront real organisations.  The paper concludes by observing that both paradigms presently to a large extent do not pay attention to a particular principal-agent situation in which control may need to be exercised.

scholarly journals The history of transaction cost economics and its recent developments

2009 ◽  
Vol 2 (1) ◽  
pp. 29 ◽  
Author(s):  
Lukasz Hardt
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Organizational Theory ◽  
Transaction Cost Economics ◽  
Recent Developments ◽  
History Of ◽  
Positive Knowledge

The emergence of transaction cost economics (TCE) in the early 1970s with Oliver Williamson's successful reconciliation of the so-called neoclassical approach with Herbert Simon's organizational theory can be considered an important part of the first cognitive turn in economics. The development of TCE until the late 1980s was particularly marked by treating the firm as an avoider of negative frictions, i.e., of transaction costs. However, since the 1990s TCE has been enriched by various approaches stressing the role of the firm in creating positive value, e.g., the literature on modularity. Hence, a second cognitive turn has taken place: the firm is no longer only seen as an avoider of negative costs but also as a creator of positive knowledge.

The contract-type choice for short-term software development outsourcing: The role of behaviour-based formal control

2020 ◽  
pp. 026839622096766
Author(s):  
Cornelia Gaebert ◽  
Karlheinz Kautz
Keyword(s):  
Software Development ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
It Outsourcing ◽  
Short Term ◽  
Term Contract ◽  
Short Term Contract ◽  
Contract Type ◽  
Software Development Outsourcing

With this article, we contribute to the recent debate regarding the role of transaction cost economics in IT outsourcing and software development outsourcing research. Our focus is on the contract-type choice for short-term software development outsourcing. For this purpose, we critically examine transaction cost economics and the extant IT outsourcing/software development outsourcing literature and propose a framework which classifies software development outsourcing transactions according to transaction frequency and transaction investment characteristics. The framework identifies short-term software development outsourcing as an occasional, idiosyncratic transaction. Based on this groundwork, we clarify the concept of short-term contract and put forward that such a transaction is governed by a short-term contract. Following transaction cost economics and control theory, our resulting theoretical considerations infer that for short-term software development outsourcing, the vendor’s high human asset specificity and the resulting behaviour-based outcome control, the monitoring of the developer staff, are the triggers for contract-type decisions. Accordingly, staff monitoring by the client should result in Time & Material contracts, whereas staff monitoring by the vendor should result in Fixed Price contracts. We develop corresponding hypotheses which we test with 468 specific contract records for short-term software development outsourcing. The results confirm the transaction cost economics–based recommendations for contract-type choice. We therefore conclude that the advice of the transaction cost economics to use certain governance structures according to transaction attributes is also applicable to IT outsourcing/software development outsourcing transactions. We suggest further exploration of specific contract records to substantiate our results.

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