FROM TRANSACTION COST TO
TRANSACTIONAL VALUE ANALYSIS:
IMPLICATIONS FOR THE STUDY OF
INTERORGANIZATIONAL STRATEGIES
Edward J. Zajac & Cyrus P. Olsen
Journal of Management Studies, 30 (1): 131-145
Presented by Jiayue (Julie) Ao, Fall 2016
Overview
 Interorganizational Strategies
 Limitations of Transaction Cost Perspective
 A Single Firm, Cost Minimization Emphasis
 A Structural Emphasis
 Transactional Value Analysis
 Joint Value Maximization Emphasis
 A Processual Emphasis
 Conclusions
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Interorganizational Strategies
 Interorganizational strategies are formed voluntarily by two (or
more) organizations seeking to create and sustain a relationship
that is valuable to both firms.
 Crucial transactional issue is both organizations’ concern.
 There is a fundamental transformation in interorganizational
exchange relationships.
 Example: Joint ventures
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Limitations of Transaction Cost Perspective
 When applied to interorgnaizational strategies, the standard
transaction cost analysis involves only one of the two parties
engaged in an interdependent exchange relationship.
 Neglects the interdependence between exchange partners
 Williamson’s view overemphasizes the structural analysis of
interorganizational exchange relationships and neglects
processual issues.
 Neglects development processes
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A Single Firm, Cost Minimization Emphasis
Williamson (1975-1985)
Vertical integration
 The efficient solution to
a transaction cost
minimization problem
 Example: Firm Upstream
(Firm U) and Firm
Downstream (Firm D)
The decision to integrate
vertically reflects:
 A single firm, rather than
multi-firm
 One firm’s “make or buy”
decisions
 Consider only its own
transaction costs
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A Structural Emphasis
Williamson (1975-1985)
Logic of market structureconduct-performance
paradigm
• Small numbers (number of
buyers or sellers) & Bilateral
monopoly (number of firms
in an industry)
• Asset specificity & Exit
barriers
Having certain structural
properties before contract
execution and other structural
properties after contract
execution (ex ante and ex
post)
Fails to recognize that
“fundamental transformation”
is a process
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A Joint Value Maximization Emphasis
 How to estimate expected value over the expected duration of
the interorganizational strategy?
 How to create that value with the partner firm?
 Gains that emerge form differences in interests (traded off to
create mutual benefit)
 Gains that emerge form similarities in interests (blocked or
hidden)
 Need for taking a processual approach
 How to claim that value?
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A Processual Emphasis
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Conclusions
 The article integrates
strategic, learning,
and transaction cost
approach
 A different approach
from transaction cost
perspective in
interorganizational
strategies
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PERSPECTIVES
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What I Have Learned
Transaction Value vs. Transaction Cost
 Greater value or Minimize costs
 More optimistic view or more pessimistic view
 Multi-firm or Single firm
Think differently
 Derive new theories based on classic ones
 Different environment
 Different industries
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THANK YOU
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