Organization of the firm's activities: A pragmatic research paradigm extension of transaction cost theory

Rana Chummar Olapurath, Purdue University

Abstract

This dissertation proposes an alternative research paradigm for social science research, the pragmatic research paradigm. Research paradigms are coherent sets of beliefs about that the nature of social reality, purpose of social science research, nature of knowledge, and research procedures and criteria, held by practicing researchers, and that guide the research they do. The first part of this study identifies and describes the four established social science research paradigms (empirical-analytical/positivist, interpretive, critical and postmodern paradigms), and then develops the pragmatic research paradigm using ideas from research programs on such topics on neo-pragmatist philosophy, and the theory of structuration. The second part of the dissertation then proposes a theoretical framework of the organization of the firm's activities that is congruent with the pragmatic research paradigm. In order to explain the coordination of the on-going activities of the firm, the framework extends the transaction cost theory by integrating ideas from other theories of organization. One way that the framework extends transaction cost theory is by considering a wider range of governance structures. Prior transaction cost research has generally divided governance structures into three broad categories, markets, firms, and alliances. The heterogeneous and mutually non-exclusive nature of these categories has distorted understanding of when each of these governance structures is most efficient, and limited the number of governance structures that have been considered by the theory. This study addresses these problems by arguing that governance structures can be viewed as a combination of a few fundamental modes of organization (exchange, authority, and trust), and by using these modes to represent governance structures. Another way the framework extends transaction cost theory is by considering other explanatory factors besides asset specificity that affect the efficiency of governance structures. The framework also extends the explanation of when each governance structure will be efficient, by explicitly adopting a functionalist format and by using information processing requirements rather than opportunism to explain the relationship between governance structures and explanatory factors. The framework also extends transaction cost theory's explanation of how the most efficient governance structures are chosen by identifying four causal mechanisms, and when each will be used.

Degree

Ph.D.

Advisors

Schendel, Purdue University.

Subject Area

Management|Business costs

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