Transaction Costs in the Automotive Sector: Transactional Attributes, Behavioral Assumptions and Theoretical Limitations

Cleiciele Albuquerque Augusto, José Paulo de Souza, Silvio Antonio Ferraz Cario

Abstract


Objective: Our objective with this article was to understand the influence of the choice of governance structures by automakers to obtain their auto parts on transaction costs.

Method: We carried out a qualitative, descriptive and cross-cut research regarding the years of 2016 and 2017. We collected primary data from semi-structured interviews with agents from three automotive assemblers and from Industries Federation of the State of Paraná (FIEP).

Originality / Relevance: According to the Economy of Transaction Costs theory (ECT), in the specific sector of auto parts of the automotive industry, vertical integration would be the most efficient structure. However, we questioned whether this is the reality in this sector, since integration and disintegration movements are identified in the literature. The strength of the transaction attribute is analyzed as a determining factor for governance structure choice.

Results: No strong evidence was found to justify the choice of vertical integration or contracting in the sector, considering the assumptions of ECT (theoretical basis of the study). The results point out auto parts of high specificity in both structures.

Theoretical / methodological contributions: We concluded that the high level of specificity alone does not justify the choice for vertical integration or contracting. Thus, complementary theoretical approaches are necessary to understand the firm’s boundary decisions.

Social / management contributions: The choice of theoretical complementarity to understand the phenomena, especially associated to the decisions to integrate activities or not, may help managers in their operational and strategic decisions.


Keywords


Transaction costs. Asset specificity. Automotive industry. Contracts. Vertical integration.

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