Monday, 19 October 2009

Transaction costs again

Why don't I want to use economic and risk management theories for this research? Specifically why don't I want to use transaction costs?

Moran and Ghoshal start their1996 paper by describing two campers facing a tiger. One reaches for his running shoes despite not being able to outrun a tiger, but he points out that he only needs to outrun his colleague. That attitude indicates the type of relationship they have, and it doesn't involve trust, working together, getting things done together. It is not collaborative. Moran and Ghoshal point out that the attitude depends on two assumptions:
  • human nature behaviour is opportunistic
  • efficiency

What are transaction costs? Economists define them as the costs of administration of contracts and relationships between firms, and Fukuyama, {1996} says networks are a means of trust generation and networks can save on transaction costs

Armbrüster, T. (2006). The economics and sociology of management consulting. Cambridge, Cambridge University Press.
Ghoshal, S. and P. Moran (1996). "BAD FOR PRACTICE: A CRITIQUE OF THE TRANSACTION COST THEORY." Academy of Management Review 21(1): 13-47.
Moran, P. and S. Ghoshal VALUE CREATION BY FIRMS. Academy of Management Best Papers Proceedings, Academy of Management.
Fukuyama, F. (1996). Trust : the social virtues and the creation of prosperity. London, Penguin.
MCKENNA, C. D. (2006) The World's Newest Profession: Management Consulting in the Twentieth Century, Cambridge University Press.

No comments: