Economists' perceptions versus managers' decisions: an experiment in transaction cost analysis

James H. Love*, Stephen Roper

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

Are the perceptions of professional economists on transaction costs consistent with make-or-buy decisions made within firms? The answer may have important implications for transaction cost research. Data on firms' outsourcing during the new product development process are taken from a largescale survey of UK, German and Irish manufacturing plants, and we test the consistency of these outsourcing decisions with the predictions derived from the transaction cost perceptions of a panel of economists. Little consistency is evident between actual outsourcing patterns and the predictions of the (Williamsonian) transactions cost model derived from the panel of economists. There is, however, evidence of a systematic pattern to the differences, suggesting that a competence or resource-based approach may be relevant to understanding firm outsourcing, and that firms are adopting a strategic approach to managing their external relationships. © Cambridge Political Economy Society 2005; all rights reserved.

Original languageEnglish
Pages (from-to)19-36
Number of pages18
JournalCambridge Journal of Economics
Volume29
Issue number1
DOIs
Publication statusPublished - 2005

Bibliographical note

© Cambridge Political Economy Society 2005; all rights reserved.
This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Cambridge journal of economics following peer review. The definitive publisher-authenticated version Love, J. H., & Roper, S. (2005). Economists' perceptions versus managers' decisions: an experiment in transaction cost analysis. Cambridge journal of economics, 29(1), 19-36 is available online at: http://cje.oxfordjournals.org/content/29/1/19

Keywords

  • transaction costs
  • outsourcing
  • economists’ perceptions
  • experiment

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