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Integrating transaction costs theory and real options theory
Author(s) -
Sanchez Ron
Publication year - 2003
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1124
Subject(s) - transaction cost , microeconomics , economics , value (mathematics) , database transaction , internalization theory , supply and demand , supply chain , representation (politics) , industrial organization , demand side , supply side , business , computer science , marketing , machine learning , politics , political science , law , programming language
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 © 2003 John Wiley & Sons, Ltd.