ABSTRACT
The discussion of the boundaries of the firm in Chapters 4–6 has not extended beyond the traditional economic perspective that draws a clear distinction between markets and firms. The former are characterised by arms-length anonymous relationships with information flows based on volume and price; while the latter involve direct organisation and cooperation within an identifiable unit with flows of qualitative information. Arguably, however, this dichotomous framework is an oversimplification which cannot accommodate the complex array of economic institutions that involve long-run co-operative relationships between separate units. Transaction cost theorists have recognised the growing importance of these ‘anomalous’ relationships. Williamson (1985:83) claims he was earlier (1975) of the opinion that transactions would cluster at the extremes of market and hierarchy, intermediate forms being unstable, but he has become increasingly persuaded that transactions in the middle range are much more common.1 Similarly Casson (1987) argues, with respect to multinational companies, that alternatives to internalisation, such as franchising, subcontracting, joint ventures and cartels, are being used more frequently. These ‘alternative’ governance structures will be the concern of this chapter. Initially the discussion will concentrate on clarifying what is meant by quasi-integration, and related matters. Following this transaction cost explanations are considered. Perhaps inevitably, given the content of previous chapters, these analyses are found to have shortcomings: therefore, alternative perspectives are developed.
