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The determinants of the vertical boundaries of the construction firm: comment

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  • Chen-Yu Chang

Abstract

In recent years, the study of organizational issues has made a tremendous progress owing to the development of two powerful analytical theories - transaction cost economics (TCE) and the resource-based view (RBV). Both approaches have their strengths and limitations and thus researchers might think that synthesizing would be a way forward, Bridge and Tisdell (2004) being a case. In synthesizing TCE and RBV, several problems need to be overcome. First, there is a fundamental disparity in the basic assumption of rationality adopted by transaction cost economics (TCE) and. second, even after being operationalized for discovering the key determinants of the concept of competence, it still cannot escape the charge of tautology. Last, the inclusion of competence/resource and TCE-related variables may increase predictive power, but the potentially high correlation between asset specificity and rarity, as well as costliness to imitate, are likely to cause the multicollinearity problem that may reduce the reliability of estimators and hence disguise the true effect of each variable on construction contracting. Even if the critiques of tautology and multicollinearity can be technically overcome, ontological tension will remain.

Suggested Citation

  • Chen-Yu Chang, 2006. "The determinants of the vertical boundaries of the construction firm: comment," Construction Management and Economics, Taylor & Francis Journals, vol. 24(3), pages 229-232.
    • Handle: RePEc:taf:conmgt:v:24:y:2006:i:3:p:229-232
    DOI: 10.1080/01446190500516579
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    References listed on IDEAS

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    1. Farrell, Joseph, 1987. "Information and the Coase Theorem," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 113-129, Fall.
    2. Eccles, Robert G., 1981. "The quasifirm in the construction industry," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 335-357, December.
    3. Adrian J Bridge & Clem Tisdell, 2004. "The determinants of the vertical boundaries of the construction firm," Construction Management and Economics, Taylor & Francis Journals, vol. 22(8), pages 807-825, October.
    4. Oliver E. Williamson, 1999. "Strategy research: governance and competence perspectives," Strategic Management Journal, Wiley Blackwell, vol. 20(12), pages 1087-1108, December.
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    Cited by:

    1. Mousalam Alabdul Razzak & Osama Sam Al-Kwifi & Zafar U. Ahmed, 2018. "Rapid Alignment of Resources and Capabilities in Time-Bound Networks: A Theoretical Proposition," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 19(4), pages 273-287, December.
    2. Adrian Bridge & Clem Tisdell, 2006. "The determinants of the vertical boundaries of the construction firm: response," Construction Management and Economics, Taylor & Francis Journals, vol. 24(3), pages 233-236.

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