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Procurement: The Transaction Costs Perspective in a Globalising World

Author

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  • Frank A.G. den Butter

    (VU University Amsterdam)

Abstract

Fragmentation of production into more and more complex supply chains is a prominent feature of globalisation. It implies that transaction costs as part of total costs of ownership carry a large weight in procurement decisions. An analysis of the various types of transaction costs is also essential in the “make or buy” and location decisions in global sourcing. A distinction can be made between “hard” and “soft” transaction costs. Soft transaction costs are difficult to quantify but become more important in strategic business decisions now that formal trade barriers gradually disappear and transport costs are reduced. Business strategies to keep transaction costs low in the long run can also, to a considerable extent, explain socially responsible business conduct from the perspective of rational economic behaviour.

Suggested Citation

  • Frank A.G. den Butter, 2007. "Procurement: The Transaction Costs Perspective in a Globalising World," Tinbergen Institute Discussion Papers 07-091/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20070091
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    File URL: https://papers.tinbergen.nl/07091.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    procurement; outsourcing; transaction costs; managing transactions; orchestrating the supply chain;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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