Pushkinskaya st. 43. office 10
Rostov-on-Don, Russia
e-mail: info@hjournal.ru 
tel. +7(863) 269-88-14

cubsEN (2)

Transaction Cost and Activity of Economic Agents

Transaction Cost and Activity of Economic Agents

Journal of Institutional Studies, , Vol. 9 (no. 1),

The goal of the present paper is to clarify the role of transaction cost for existence of an economic agent. It is demonstrated that the opposition of transaction cost and transformation cost is not rigid and there are costs that contain both transaction and transformation component. In addition the amount of transaction cost depends on parameters of company’s activity. This is why it is hardly possible to find the precise minimum of transaction cost and the model of organization of transactions within firm will be flexible.
The firm’s structure contains special transaction divisions (centers of transaction cost) that are necessary for existence of the firm as a mechanism of organization of transactions (opposed to market). The status of these divisions depends on firm’s size.
Transaction divisions can also exist outside the firm. They will minimize transaction costs of other economic agents on the basis of external effect of scale. External transaction divisions can exist both as collective structures (coordinating centers of strategic alliances) as well as independent ones (franchisors).
A comparative analysis of transaction divisions and centers of cost was done. It was demonstrated that these elements of the firm have different economic and organizational structure.
The notion of cost of external profitability was introduced. This notion can be used to analyze reasons for merger of companies or for their existence as independent structures. It is demonstrated that one of the functions of the firm is to use resources that cannot be used within independent production units.

Keywords: transaction cost; transformation cost; hybrids; firm; market; scale economy.

  • Akhmetzhanov B. and Shokhor M. (2014). About the profit difference in case of vertically integrated and disintegrated forms of production. Economist, no. 7, pp. 46-52. (In Russian).
  • Alchian A. and Demsetz H. (1972). Production, Information Costs, and Economic Organization. The American Economic Review, vol. 6, issue 5, pp. 777–795.
  • Blair Roger D. and Lafontaine Francine (2005). The Economics of Franchising. N. Y., Cambridge University Press.
  • Bol’shakov A. V. (2012). Genesis and structure of business networks in the context of the theory of postindustrial economy. Economic Analysis: Theory and Practice, no. 10, pp. 35-40. (In Russian).
  • Coase R. H. (1937). The Nature of the Firm. Economica, vol. 16, no. 4, pp. 386-405.
  • Dementiev V. E. and Ustyuzhanina E. V. (2016). The problem of power: institutional approach. Journal of Institutional Studies, vol. 8, no. 3, pp. 91-101. (In Russian).
  • Dessein W. (2013). Incomplete Contracts and Firm Boundaries. The Journal of Law, Economics, and Organization, vol. 30, supplement 1, pp. 13-36.
  • Furubotn E. G. and Richter R. (2005). Institutions and Economic Theory. The Contribution of the New Institutional Economics. St. Petersburg, Publ. House of the St. Petersburg State University. (In Russian).
  • Gilligan M. J. (2009). The Transactions Costs Approach to International Institutions. Power, Interdependence and Nonstate Actors in World Politics / ed. by H. V. Milner, A. Moravcsik. Princeton, Princeton University Press, pp. 50-65.
  • Gubanov S. (2001). Vertical integration as the principal way of development. Economist, no. 1, pp. 35-49. (In Russian).
  • Imai Masaaki (2005). Gemba Kaizen: A Commonsense, Low-Cost Approach to Management. Moscow, Publ. House «Alpina Business Books». (In Russian).
  • Hart O. and Moore J. (2005). On the Design of Hierarchies: Coordination Versus Specialization. Journal of Political Economy, vol. 113, pp. 675–702.
  • Holmstrom B. (1999). The Firm as a Subeconomy. Journal of Law, Economics and Organization, vol. 15, pp. 74–102.
  • Kiryanov I. V. (2013). Internal cost as an economic category in modeling of finance or possibility of synthesis of structure. Economics and Entrepreneurship, no. 9, pp. 592-601. (In Russian).
  • Kiryanov I. V. (2015a). Quantitative analysis of transaction cost: a cardinal approach. Problems of Theory and Practice of Management, no. 3, pp. 127-137. (In Russian).
  • Kiryanov I. V. (2015b). Transaction Cost, the Phenomenon of the Trading House and Economic Organization. Journal of Institutional Studies, vol. 7, no. 4, pp. 112-127. (In Russian).
  • Lutskaya N. V. (2016). Outsourcing: Levels of Service and Models of Cooperation. Competence, no. 2, pp. 28-34. (In Russian).
  • Marino A., Matsusaka J. and Zabjonik J. (2010). Disobedience and Authority. Journal of Law, Economics and Organization, vol. 26, pp. 427–59.
  • Ménard C. (2004). The Economics of Hybrid Organizations. Journal of Institutional and Theoretical Economics, vol. 160, pp. 345-376.
  • Meramveliotakis G. and Milonakis D. (2010). Surveying the Transaction Cost Foundations of New Institutional Economics: A Critical Inquiry. Journal of Economic Issues, vol. XLIV, no. 4, pp. 1045-1071.
  • Powell W. and Smith-Doerr L. (2003). Networks and economic life. Economic Sociology, vol. 4, no. 3, pp. 61-105. (In Russian).
  • Radaev V. V. (2011). Power on Customer Markets: Relations between Retail Chains and Suppliers in Contemporary Russia. Moscow, Publ. House of HSE. (In Russian).
  • Thorelli Hans B. (1986). Networks: between markets and hierarchies. Strategic Management Journal, vol. 7, no. 1, pp. 37-51.
  • Tret’yak O. A. and Rumyantseva M. N. (2003). Network forms of interfirm cooperation: approaches towards the explanation of the phenomenon. Russian Journal of Management, vol. 1, no. 2, pp. 25-50. (In Russian).
  • Williamson O. (1991). Comparative Economic Organization: The Analysis of Discrete Structural Alternatives. Administrative Science Quarterly, vol. 36, no. 2, pp. 269-296.
  • Williamson O. (1996). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. St. Petersburg, Lenizdat, CEV Press. (In Russian).
  • Williamson O. (2002). The Theory of the Firm as Governance Structure: From Choice to Contract. Journal of Economic Perspectives, vol. 16, pp. 171–95.
  • Williamson O. (2010). Outsourcing: transaction cost economics and supply chain management. Rossiyskiy Zhurnal Menedzhmenta, vol. 8, no. 1, pp. 71-92. (In Russian).
  • Zenger T. R., Felin T. and Bigelow L. (2011). Theories of the Firm-Market Boundary. The Academy of Management Annals, vol. 5, no. 1, pp. 89-133.
Publisher: Ltd. "Humanitarian perspectives"
Founder: Ltd. "Humanitarian perspectives"
Online-ISSN: 2412-6039
ISSN: 2076-6297