Strategic disruption and transaction cost economics: The case of the American auto industry and Japanese competition

William F. Averyt and K. Ramagopal

International Business Review, 1999, vol. 8, issue 1, 39-53

Abstract: This paper develops the concept of strategic disruption using the insights of Transaction Cost Economics (TCE). Firms attack competitors by shaping government rules in order to produce misalignment of competitors' transactions and governance structures. Strategic disruption is illustrated by the case of American automobile producers in their struggle against Japanese competitors over the last two decades. The Americans' use of strategic disruption relied on a two-pronged approach. The first approach involved local content provisions and the second approach involved rules of origin in the North American Free Trade Agreement (NAFTA). These two tactics forced the Japanese producers to realign their transactions and governance structures, turning to second-best alternatives. Strategic disruption provides a new way of thinking about strategic entry barriers whereby government rules alter competitors' decisions because it changes their transaction cost configuration.

Keywords: Transaction; cost; Strategic; disruption; Barriers; to; entry (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (4)

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