Open AccessRisk Propensity, Trust, and Transaction Costs In Relational Contracting
Author(s) -
John K. Masters,
Grant Miles,
Derrick E. D’Souza,
John Patrick Orr
Publication year - 1970
Publication title -
journal of business strategies
Language(s) - English
Resource type - Journals
eISSN - 2162-6901
pISSN - 0887-2058
DOI - 10.54155/jbs.21.1.47-68
Subject(s) - opportunism , transaction cost , hierarchy , corporate governance , neutrality , database transaction , microeconomics , economics , business , externality , law and economics , actuarial science , political science , computer science , law , finance , programming language , market economy
Critics of transaction cost economics (TCE) argue that TCE is not able toexplain variations in governance arrangements between the extremes of marketand hierarchy. They further dispute the assumptions of opportunism andrisk neutrality underlying the theory. While TCE proponents have developedapproaches that address each of these criticisms separately, we propose thatcombining the approaches to simultaneously address both challenges altersthe nature of the predictions. We explore the roles of risk propensity and trustwithin a TCE framework. We then test the ability of these variables to predictvariations in governance between the extremes of market and hierarchy.