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    Minimizing Transaction Costs in InterOrganizational Strategy

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    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 inter organizational strategies in order to minimize transaction costs and bureaucratic costs?

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    Organizations consider the costs of each part of the equation in order to minimize transaction coasts and bureaucratic costs. This includes the costs of the employees or service involved in search, contracting, and coordination. These costs would include the salary, benefits, and time involved of the buyer, as well as costs involved in prototyping, product development, and sourcing. Also, all bargaining costs would be included. And, lastly, policing and enforcement costs must be taken into account, which may involve third party ...

    Solution Summary

    This solution outlines what organizations consider when trying to choose inter organizational strategies in order to minimize transaction costs and bureaucratic costs. APA references are included.

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