Transaction cost theory states that the goal
of an organization is to minimize the
costs of exchanging resources in the
environment and the costs of managing
exchanges inside the organization.
Transaction costs are defined as the
costs of negotiating, monitoring, and
governing exchanges between people
Transaction costs result from a combination
of human and environmental factors
Transaction costs result from a combination
of human and environmental factors:
Opportunism and small numbers
Risk and specific assets
Specific assets are investments that
create value in one relationship, but
have no value in another relationship.
Transaction costs are low when these conditions exist:
Organizations are exchanging nonspecific goods and services
Uncertainty is low
There are many possible exchange partners
Transaction costs increase when these conditions exist:
Organizations begin to exchange nonspecific goods and services
Uncertainty increases
The number of possible exchange ...