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Transaction Cost Economics (TCE) and the Family Firm

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  • Alain Verbeke
  • Liena Kano

Abstract

Gedajlovic and Carney's application of transaction cost economics (TCE) thinking to the family business builds on TCE's concept of asset specificity. Our analysis augments this application. We focus on TCE's behavioral assumptions, which act as drivers of failed human commitments. We show that both the exposure and response to bounded rationality and bounded reliability challenges may be different in family firms versus Chandlerian hierarchies, and introduce the new concept of family–based human asset specificity.

Suggested Citation

  • Alain Verbeke & Liena Kano, 2010. "Transaction Cost Economics (TCE) and the Family Firm," Entrepreneurship Theory and Practice, , vol. 34(6), pages 1173-1182, November.
    • Handle: RePEc:sae:entthe:v:34:y:2010:i:6:p:1173-1182
    DOI: 10.1111/j.1540-6520.2010.00419.x
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    References listed on IDEAS

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    2. Jess H. Chua & James J. Chrisman & Erich B. Bergiel, 2009. "An Agency Theoretic Analysis of the Professionalized Family Firm," Entrepreneurship Theory and Practice, , vol. 33(2), pages 355-372, March.
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    Cited by:

    1. Todor S. Lohwasser & Felix Hoch & Franz W. Kellermanns, 2022. "Strength in Stability: A Meta-Analysis of Family Firm Performance Moderated by Institutional Stability and Regime Type," Entrepreneurship Theory and Practice, , vol. 46(1), pages 117-158, January.
    2. Josip Kotlar & Philipp Sieger, 2019. "Bounded Rationality and Bounded Reliability: A Study of Nonfamily Managers’ Entrepreneurial Behavior in Family Firms," Entrepreneurship Theory and Practice, , vol. 43(2), pages 251-273, March.
    3. Mike W. Peng & Wei Sun & Cristina Vlas & Alessandro Minichilli & Guido Corbetta, 2018. "An Institution-Based View of Large Family Firms: A Recap and Overview," Entrepreneurship Theory and Practice, , vol. 42(2), pages 187-205, March.
    4. Maria Cristina Sestu & Antonio Majocchi, 2020. "Family Firms and the Choice Between Wholly Owned Subsidiaries and Joint Ventures: A Transaction Costs Perspective," Entrepreneurship Theory and Practice, , vol. 44(2), pages 211-232, March.
    5. Alain Verbeke & Liena Kano, 2012. "The Transaction Cost Economics Theory of the Family Firm: Family–Based Human Asset Specificity and the Bifurcation Bias," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1183-1205, November.
    6. Luciano Ciravegna & Liena Kano & Francesco Rattalino & Alain Verbeke, 2020. "Corporate Diplomacy and Family Firm Longevity," Entrepreneurship Theory and Practice, , vol. 44(1), pages 109-133, January.
    7. Luigi Lepore & Francesco Paolone & Domenico Rocco Cambrea, 2018. "Ownership structure, investors’ protection and corporate valuation: the effect of judicial system efficiency in family and non-family firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(4), pages 829-862, December.
    8. James J. Chrisman & Esra Memili & Kaustav Misra, 2014. "Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality," Entrepreneurship Theory and Practice, , vol. 38(5), pages 1-25, September.
    9. Duréndez, Antonio & Madrid-Guijarro, Antonia, 2018. "The impact of family influence on financial reporting quality in small and medium family firms," Journal of Family Business Strategy, Elsevier, vol. 9(3), pages 205-218.
    10. Melih Madanoglu & Esra Memili & Alfredo De Massis, 2020. "Home-based family firms, spousal ownership and business exit: a transaction cost perspective," Small Business Economics, Springer, vol. 54(4), pages 991-1006, April.
    11. Ulrich Lichtenthaler & Miriam Muethel, 2012. "Retracted: The Impact of Family Involvement on Dynamic Innovation Capabilities: Evidence from German Manufacturing Firms," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1235-1253, November.
    12. Kimberly A. Eddleston & James J. Chrisman & Lloyd P. Steier & Jess H. Chua, 2010. "Governance and Trust in Family Firms: An Introduction," Entrepreneurship Theory and Practice, , vol. 34(6), pages 1043-1056, November.
    13. Jelle Schepers & Wim Voordeckers & Tensie Steijvers & Eddy Laveren, 2021. "Entrepreneurial intention-action gap in family firms: bifurcation bias and the board of directors as an economizing mechanism," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 451-475, September.
    14. Apalak Khatua, 2022. "Diagnoses: Bajaj Electricals—Lighting Up the Future Case Analysis," Vikalpa: The Journal for Decision Makers, , vol. 47(1), pages 68-72, March.
    15. Alain Verbeke & Liena Kano, 2013. "The transaction cost economics (TCE) theory of trading favors," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 409-431, June.
    16. Uchida, Hirofumi & Yamada, Kazuo & Zazzaro, Alberto, 2023. "Management innovations in family firms after CEO successions: Evidence from Japanese SMEs," Japan and the World Economy, Elsevier, vol. 66(C).
    17. Dau, Luis Alfonso & Purkayastha, Saptarshi & Eddleston, Kimberly A., 2020. "Who does it best? Family and nonfamily owners and leaders navigating institutional development in emerging markets," Journal of Business Research, Elsevier, vol. 107(C), pages 197-210.
    18. Nicolai J. Foss & Peter G. Klein & Lasse B. Lien & Thomas Zellweger & Todd Zenger, 2023. "Ownership competence: The enabling and constraining role of institutions," Strategic Management Journal, Wiley Blackwell, vol. 44(8), pages 1955-1964, August.
    19. Chang, Erick P.C. & Zare, Sina & Ramadani, Veland, 2022. "How a larger family business is different from a non-family one?," Journal of Business Research, Elsevier, vol. 139(C), pages 292-302.
    20. Kammerlander, Nadine, 2022. "Family business and business family questions in the 21st century: Who develops SEW, how do family members create value, and who belongs to the family?," Journal of Family Business Strategy, Elsevier, vol. 13(2).
    21. Barrédy, Céline, 2023. "The paradox between monitoring and entrenchment in a two-tier family business: The contribution of the external commitment theory," Journal of Business Research, Elsevier, vol. 155(PB).
    22. James J. Chrisman & Jess H. Chua & Lloyd P. Steier, 2011. "Resilience of Family Firms: An Introduction," Entrepreneurship Theory and Practice, , vol. 35(6), pages 1107-1119, November.
    23. Khatua, Apalak, 2023. "Why is diversification not dead? Evidence from family business groups during economic reforms in India," Journal of Family Business Strategy, Elsevier, vol. 14(2).

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