The three essays of this dissertation complement extant research by explicitly revealing the boundary conditions of the central predictions of transaction cost economics and by offering traceable novel insights from the integration of this approach and resource-based explanations of the firm’s boundary choices.
Chapter two employs a semi-formal modeling approach to examine the central predictions of transaction cost economics regarding asset specificity and governance forms. The analysis assumes away capability differences across firms. The approach factors several issues that are often acknowledged but rarely examined in the extant research, such as diminishing returns to transaction specific investment, endogeneity in asset specificity and governance form choices, lack of focus on both the parties in a transaction, and ex-ante alternative uses of resources. Incorporating these factors into the analysis provides a more precise articulation of the boundary conditions surrounding the central prediction of transaction cost economics.
Chapter three extends the semi-formal model presented in the chapter two by considering differences in productive capabilities across potential exchange partners to integrate transaction cost and resource-based perspectives on the firm’s boundary choices. In particular, the analysis focuses on whether and how differences in the levels of asset specificities across transaction stages and differences in the productive capabilities across potential partners affect governance mode choices. The analysis identifies the specific conditions where the application of the resource-based logic may alter standard transaction cost economics predictions.
Chapter four further extends the model by considering firm specific governance capabilities. It examines the relationship between governance capabilities and governance forms by integrating asset specificity, productive capability, and governance capability perspectives on the firm’s boundary choices. The analysis examines whether and how differences in productive capabilities across potential partners and the partner firm’s governance capabilities may affect the relationship between the focal firm’s governance capabilities and governance forms. This chapter suggests that only in specific conditions a firm’s governance capabilities related to a specific governance form favor that governance form.
The dissertation offers several opportunities for future research and presents an approach that can be exploited to examine these opportunities.