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The Elgar Companion to Transaction Cost Economics

The Elgar Companion to Transaction Cost Economics

Elgar original reference

Edited by Peter G. Klein and Michael E. Sykuta

Since its emergence in the 1970s, transaction cost economics (TCE) has become a leading approach in the research on contracts, firm organization and strategy, antitrust, marketing, inter-firm collaboration and entrepreneurship. With contributions by leading scholars in economics, law and business administration – including Oliver E. Williamson, recipient of the 2009 Nobel Prize in economics for his development of the transaction cost approach – this volume reviews the latest developments in TCE and applies them to contemporary theoretical and empirical problems.

Chapter 18: Hybrid Organizations

Claude Ménard

Subjects: economics and finance, industrial economics, industrial organisation


Claude Ménard There are many ways to organize transactions in a modern market economy. Beside the polar cases of spot markets on the one hand, in which trading activities are coordinated through the price mechanism, and integrated firms on the other hand, in which the allocation of resources and the coordination of decisions depend in the last resort on a hierarchical structure, many different types of arrangements have developed, from long-term bilateral contracts to franchise systems and networks of tightly interwoven firms. These non-standard forms likely represent the usual way of doing business, although they deviate from the usual representation of microeconomic textbooks in which there are firms, that is, ‘producers’ processing goods and services through a production function, and ‘markets’, that is, places in which producers and consumers proceed to exchanges. In what follows I concentrate on forms that involve multiple partners pooling some strategic decision rights and even some property rights while keeping distinct ownership over key assets, so that they require specific governance to monitor and discipline their interactions. I identify these arrangements as ‘hybrid organizations’, in line with the terminology proposed by Oliver Williamson (1991).1 In the next section I go farther in identifying and delineating these arrangements. I will then discuss the forces at work that may explain why parties accept to share strategic rights in the next section. The following section exhibits different mechanisms of coordination that may play distinctly or in combination. The next section suggests a typology of hybrid organizations...

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