Integrating transaction costs theory and real options theory

Ron Sanchez
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Ron Sanchez: IMD-International Institute for Management Development, Lausanne, Switzerland, Postal: IMD-International Institute for Management Development, Lausanne, Switzerland

Managerial and Decision Economics, 2003, vol. 24, issue 4, 267-282

Abstract: This paper develops an integration of transactions costs theory and real options theory that leads to a more complete representation of the problem of economic organizing. By recognizing the opportunity costs associated with internalization of specific-use assets when flexible assets are also available, the integrated theoretical framework provides better insights into optimal strategies for configuring value chains under supply-side and demand-side uncertainty. This expanded model of economic organizing suggests four optimal strategies for configuring value chains and predicts four prevailing forms of economic organization under varying combinations of contracting (supply-side) and market (demand-side) uncertainty. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:24:y:2003:i:4:p:267-282

DOI: 10.1002/mde.1124

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