MEASUREMENT COSTS AND GOVERNANCE: bridging perspectives of Transaction Cost Economics

Abstract

The theory of the firm departed from the production function paradigm towards a more general scope dealing with coordination between firms as well as its internal organization. The transaction cost perspective motivated a large volume of empirical studies particularly based on the relation between risks of quasi-rents appropriation originated from asset specific investments. Another theoretical approach to the firm also rooted in the transaction cost perspective is the measurement cost theory, which did not show the same empirical impact. Both theories share similar grounds but differ in terms of internal logic, explicit assumptions, and key measurable variables leading to methodological implications. The aim of this paper is to contrast both theories discussing the theoretical and empirical boundaries. Following the introduction, the second part presents the theoretical constructs. The third part suggests testable hypothesis and predictions. Part four presents a case of contradictory interpretation of similar observed phenomena using both lenses. Finally, part five concludes.