The determinants of the vertical boundaries of the construction firm: comment

Chen-Yu Chang

Construction Management and Economics, 2006, vol. 24, issue 3, 229-232

Abstract: In recent years, the study of organizational issues has made a tremendous progress owing to the development of two powerful analytical theories - transaction cost economics (TCE) and the resource-based view (RBV). Both approaches have their strengths and limitations and thus researchers might think that synthesizing would be a way forward, Bridge and Tisdell (2004) being a case. In synthesizing TCE and RBV, several problems need to be overcome. First, there is a fundamental disparity in the basic assumption of rationality adopted by transaction cost economics (TCE) and. second, even after being operationalized for discovering the key determinants of the concept of competence, it still cannot escape the charge of tautology. Last, the inclusion of competence/resource and TCE-related variables may increase predictive power, but the potentially high correlation between asset specificity and rarity, as well as costliness to imitate, are likely to cause the multicollinearity problem that may reduce the reliability of estimators and hence disguise the true effect of each variable on construction contracting. Even if the critiques of tautology and multicollinearity can be technically overcome, ontological tension will remain.

Keywords: Subcontracting; transaction cost; competence-based approach (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/01446190500516579

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