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Integrating transaction costs theory and real options theory

✍ Scribed by Ron Sanchez

Publisher
John Wiley and Sons
Year
2003
Tongue
English
Weight
172 KB
Volume
24
Category
Article
ISSN
0143-6570

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✦ Synopsis

Abstract

This paper develops an integration of transactions costs theory and real options theory that leads to a more complete representation of the problem of economic organizing. By recognizing the opportunity costs associated with internalization of specific‐use assets when flexible assets are also available, the integrated theoretical framework provides better insights into optimal strategies for configuring value chains under supply‐side and demand‐side uncertainty. This expanded model of economic organizing suggests four optimal strategies for configuring value chains and predicts four prevailing forms of economic organization under varying combinations of contracting (supply‐side) and market (demand‐side) uncertainty. Copyright Β© 2003 John Wiley & Sons, Ltd.

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