Accession Number : ADA318860

Title :   A Transaction Cost Analysis of Hybrid Forms of Contracting: Implications for Prediction and Performance,

Corporate Author : AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH

Personal Author(s) : Adler, Terry R.

PDF Url : ADA318860

Report Date : 25 OCT 1995

Pagination or Media Count : 99

Abstract : Transaction Cost Economics (TCE) theories of exchange have proven to be a useful tool for understanding a variety of economic relationships. The TCE model has been especially useful in explaining the boundaries of economic institutions with regard to 'make' or 'buy' decisions. However, the markets and hierarchies paradigm has been limited in explaining non- market and non-hierarchical relationships which are termed 'hybrid' forms of governance. TCE theory indicates that as assets become more specific, as uncertainty becomes more acute and as transactions become incomplete, the hierarchical form of governance becomes predominant so that control of the transaction can be internalized to the organization. However, evidence suggests that this is not the case in many transactions where long-term contracts substitute for either the market or hierarchy form of governance. Long-term contracts suffice if they sufficiently allow parties to maintain control of the transaction through the contract. Consequently, long-term contracts have to be 'complete' enough to legally allow control while negating opportunism of the transactors. The more incomplete the contract, the less control the transactors have in the relationship. While 'incompleteness' of long-term contracts is an important concept in the hybrid form of TCE theory, neither it nor the efficiency of these long-term contracts has been adequately addressed in previous research.

Descriptors :   *CONTRACTS, *ACCOUNTING, *COST ANALYSIS, *HYBRID SYSTEMS, REQUIREMENTS, UNCERTAINTY, MARKET RESEARCH, ECONOMICS, THEORY, FORECASTING, LONG RANGE(TIME), COSTS, SUBSTITUTES, HIERARCHIES, EXCHANGE.

Subject Categories : Economics and Cost Analysis
      Personnel Management and Labor Relations

Distribution Statement : APPROVED FOR PUBLIC RELEASE