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Transaction Cost Economics and Open Innovation: Implications for Theory and Practice
Author(s) -
RemnelandWikhamn Björn,
Knights David
Publication year - 2012
Publication title -
creativity and innovation management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.148
H-Index - 60
eISSN - 1467-8691
pISSN - 0963-1690
DOI - 10.1111/j.1467-8691.2012.00639.x
Subject(s) - transaction cost , normative , rationality , context (archaeology) , corporate governance , economics , industrial organization , open innovation , space (punctuation) , database transaction , business , microeconomics , marketing , management , computer science , law , political science , paleontology , programming language , biology , operating system
Transaction cost economics (TCE) has had a strong impact on theories of economic exchange but also on open innovation, even though the relationship is often implicit rather than explicit. In this paper, we highlight what we consider to be the problematic use of TCE in the context of open innovation, suggesting that it has a limited descriptive power and potentially does normative damage to open innovation practice. A case study of the Volvo Group will be drawn upon to illustrate these claims. The case questions the belief that hierarchical control eliminates transaction costs. Also, it suggests that an overemphasis on calculative reduction of transaction costs together with a focus on governance and rationality leave little space for an innovative climate, thus diverting attention away from the creative potential of transactions. Indeed the self‐fulfilling prophecy character of subscribing to the assumptions of TCE may not merely limit but actually undermine innovation.