Managing Transaction Costs in the Era of Globalization

Managing Transaction Costs in the Era of Globalization

Advances in New Institutional Analysis series

Frank A.G. den Butter

Frank A.G. den Butter explains the importance and means of keeping transaction costs as low as possible. He illustrates how this transaction management can contribute to making firms and nations more competitive by exploiting gains from the division of labour and international fragmentation of production, and uses relevant case studies to illustrate how value is created by reducing transaction costs. Policy recommendations for strengthening the competitive position of trading nations and reducing implementation costs of government policy are presented, and management methods for creating value in organizing production on a global scale are prescribed.

Chapter 1: Introduction

Frank A.G. den Butter

Subjects: economics and finance, institutional economics, international economics

Extract

This chapter gives a first impression of the increasing importance of managing transaction costs in the era of globalization. It defines the skill of keeping transaction costs low as transaction cost management, or shortly, transaction management, and explains its role in transaction economies. By keeping the costs of trade transactions as low as possible, the value creation from these transactions is optimized. Here, trade transactions are defined in the broadest sense, including all kind of transactions which specialization and the resulting need for coordination bring about. This chapter also contains a reading guide for the book.