Explore BrainMass

Discussing the Transaction Cost Theory

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

Transaction cost theory argues that the goal of organizations is to minimize the costs of exchanging resources in the environment and the costs of managing exchanges inside the organization. What do organizations consider when trying to choose interorganizational strategies in order to minimize transaction costs and bureaucratic costs? Provide at least one example of this in action.

© BrainMass Inc. brainmass.com September 20, 2018, 4:19 pm ad1c9bdddf - https://brainmass.com/business/business-management/discussing-transaction-cost-theory-429260

Solution Preview

What organizations consider when choosing inter-organizational strategies in order to minimize transaction costs and bureaucratic costs:

Transaction costs are costs involved during the monitoring, negotiating and governing of various exchanges that take place between organizations or organizations. Bureaucratic costs on the other hand are the internal transaction costs incurred within an organization. Transaction cost theory argues that an organization's goal is to minimize both external and internal transaction costs (Jones, 2010)

In the transaction cost theory, interorganizational strategies can be used in minimizing these costs and should ...

Solution Summary

The expert examines discussed the transaction cost theory.