Formal Contractual Agreements: A Transaction Cost Study of Tanzania Firms

Abstract

AbstractThis is exploratory study that aims at examining formal contractual agreements for firms in Tanzania using Transaction cost theoretical approach. Transaction cost studies have rarely being done on firms in Africa and Tanzania in particular. Sampling frame used is from Tanzania revenue authority records for registered business 2008-2010. The study is centered on business -to business buyer -seller relations. Primary data were collected from buying side of this business relationship. Random sample of n =150 buyers were contacted through telephone calls and questionnaire were delivered personally. The response rate was about 65%.The findings suggest Transaction cost theoretical framework to be highly consistent with previous findings in western setting in spite of using Tanzania as context. However there were some slightly differences which could partly be explained by study limitations. This study is limited in terms of not using variables like culture and institutions in connection to how they influence this theory.