Transaction cost economics (TCE) has been extensively applied by international business scholars to analyze joint ventures and strategic alliances. It provides a theoretical basis to analyze how firms organize their transactions with other firms, and hence their choices of governance structures, for example, between JVs and other organizational forms. However, TCE has also been frequently critiqued and empirical findings on some of the constructs derived from TCE find inconsistent results. This chapter critically evaluates the TCE literature on cross-border business activity to evaluate to what extent this empirical literature actually supports or refutes TCE-based arguments, and to provide directions for future research. We identify four major challenges: (1) the level of analysis used to proxy transaction costs, (2) contextual drivers of transaction costs, especially in emerging economies, (3) the theoretical ambiguity of TCE arguments with respect to distance and experience, and (4) the assumption that JVs are a flexible (low-risk) mode of operation. This discussion leads to suggestions on how to design empirical research more consistent with the theory.
Jiani Wang, Yi Tan and Manhong Liu
The chapter elaborates on the business angel (BA) market in China, which has developed significantly since its emergence at the end of the 1990s. The increasing numbers of successful cashed-out entrepreneurs emerging from the Internet and high-tech has resulted in the emergence of angel investment. Currently, there are numerous angel groups and matchmaking services that have served to enhance the market. The authors show that the investment behavior of Chinese BAs is very similar to that in western countries, but Chinese BAs are younger, invest more infrequently and lack an understanding of BA investing. The authors also emphasize the need to understand the role of the government in the BA market in improving the regulation and environment of BA investments.