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Essay / Research Paper Abstract
This 14 page paper looks at the economic concept of transaction costs and considers how this impacts on a firms decision to determine whether or not to undertake outsourcing. The term is defined, the way outsourcing takes place is assessed and the theory that explains these practices is discussed. The bibliography cites 20 sources.
Page Count:
14 pages (~225 words per page)
File: TS14_TEtranscost.rtf
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Unformatted sample text from the term paper:
if outsourcing of off shoring takes place. The majority of literature focuses on the production cost, but these are not the only costs that need to be considered, less visible,
but just as important are the transaction costs, Jacobides and Winter (2005) argue that transaction costs can be just as important as production costs, and are key in the outsourcing
decisions, Barney (1991) argues it is used in the way resource allocations is assessed. To consider this it is necessary to look at how transaction cost economics can be applied
to business decisions and the way that outsourcing takes place. In order to examine this concept, and the way in which transaction costs are impacting on business will first define
the term transaction costs, and the way in which it is impacting on outsourcing decisions, following this the underlying theory that explains the way that the actions identified in the
outsourcing decision-making can be explained with reference to economic theory. Transaction costs are the costs which are incurred as a result of managing production, internally or externally, but are
not production costs. The term is found initially with Coare in his paper published in 1937, entitled "The Nature of the Firm", and defined transaction costs as " the
cost of using the price mechanism" (Coase, 1988, p38). However, this is a rather ambiguous statement, and critics rightly claim that Coase failed to fully define the term (Barzel and
Kochin, 1992). However, it does give some examples of the types of costly incorporates within this time, such as the cost of negotiating and closing contract. However, this is
more useful than it may appear at first, as Chung (1969) uses approaching the analysis of shared tenancy, in order to provide contractual example of the Coase Theorem1, which demonstrates
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