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    Profit Centers, Single-Source Suppliers and Transaction Costs

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    Profit Centers Single-Source Suppliers.pdf (13.52Mb)
    Issue Date
    1991-03
    Author
    Walker, Gordon
    Poppo, Laura
    Publisher
    Sage Publications, Inc. on behalf of the Johnson Graduate School of Management, Cornell University
    Type
    Article
    Article Version
    Scholarly/refereed, publisher version
    Published Version
    http://www.jstor.org/stable/2393430
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    Abstract
    This paper addresses criticisms of transaction-cost theory that it overstates the effect of asset specialization on vertical integration and understates the costs of managing interunit relationships within an organization, particularly for nonstandard organizations and markets. We apply the theory simultaneously to decentralized supply relationships in a manufacturing corporation and to the corporation's relationships with single-source suppliers. Our results support the core proposition of the theory-that specialized assets have lower transaction costs within the organization. However, the hybrid characteristics of these supply relationships challenge both the theory's basic assumptions and its predictive power. Corporate decentralization and relational contracting in the market diminish the role of asset specificity as a necessary condition for low transaction costs in-house and as a sufficient condition for high transaction costs in the market. Therefore, how the theory should be used as a predictor of shifts in the current boundaries of the corporation is unclear.
    Description
    © 1991 by Cornell University
    URI
    http://hdl.handle.net/1808/10089
    DOI
    https://doi.org/10.2307/2393430
    ISSN
    0022-1090
    Collections
    • School of Business Scholarly Works [212]
    Citation
    Walker, Gordon and Laura Poppo (1991), "Profit Centers, Single-Source Suppliers and Transaction Costs," Administrative Science Quarterly, 36 (1), 66-87.

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    Contact KU ScholarWorks
    785-864-8983
    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    785-864-8983

    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    Image Credits
     

     

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