Chapter 8: Transaction cost perspectives on alliances and joint ventures: explanatory power and empirical limitations
Transaction cost economics (TCE) is probably the most frequently used theoretical foundation for studies of joint ventures (JVs) and strategic alliances (see reviews by Tsang, 2000; Zhao et al., 2004; Tihanyi et al., 2005; Geyskens et al., 2006; Brouthers and Hennart, 2007; Brouthers, 2013). Transaction cost economics addresses the question how firms organize their transactions with other firms, and, consequently, where they draw their organizational boundaries. Transaction cost economics provides a theoretical grounding to analyze the choice of governance structures, for example between JVs and other organizational forms, such as licensing, contracts or wholly owned subsidiaries (WOS). However, despite its parsimony and its popularity, TCE has also been frequently critiqued and is arguably the most misinterpreted theory in international business research (Borys and Jemison, 1989; Zajac and Olsen, 1993; Ghoshal and Moran, 1996). Moreover, empirical findings on some of the constructs derived from TCE find inconsistent results. While many studies support the arguments of TCE, other studies find insignificant or even opposite results (Zhao et al., 2004; Brouthers and Hennart, 2007).
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