Transaction Costs and Organizational Choice: Modeling Governance in Offshore Drilling

Abstract

This research examines oil company decisions to vertically integrate into the drilling function using a transaction cost economics framework. Risk preference is also investigated as an explanation of organizational choice. Econometric models are specified and estimated for organizational choice and for the cost functions of competing organizational options. Estimation of the cost functions permits isolation of the effects of transaction attributes to each form of organization, shedding light on the relative impacts of hazards of exchange and internal costs.Results provide support for both the transaction cost and risk preference hypotheses as determinants of organizational form. The cost functions also enable estimation of the transaction costs and incentive gains of outsourcing.

Farming without farms? Challenges for organisational behaviour research in an upcoming transformation process

“…One of them is transaction costs economics. After Coase (1937) proposed that firms exist because such units save transaction costs as compared to mere market transactions, many scholars used transaction cost arguments to explain and predict organisational choices (Jablonowski and Kleit, 2011; Vega and Keenan, 2013; Bigelow et al ., 2019). This applies also to agriculture, where transaction costs economists have repeatedly justified the existence of farms (Hobbs, 1997; Brem, 2002; Miljkovic, 2005; Demir, 2016).…”