• Journal of Distribution Science
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• v.10 no.2
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• pp.29-41
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• 2012

This paper undertakes a conceptual review of transaction cost to broaden the understanding of the transaction cost analysis (TCA) approach. More than 40 years have passed since Coase's fundamental insight that transaction, coordination, and contracting costs must be considered explicitly in explaining the extent of vertical integration. Coase (1937) forced economists to identify previously neglected constraints on the trading process to foster efficient intrafirm, rather than interfirm, transactions. The transaction cost approach to economic organization study regards transactions as the basic units of analysis and holds that understanding transaction cost economy is central to organizational study. The approach applies to determining efficient boundaries, as between firms and markets, and to internal transaction organization, including employment relations design. TCA, developed principally by Oliver Williamson (1975,1979,1981a) blends institutional economics, organizational theory, and contract law. Further progress in transaction costs research awaits the identification of critical dimensions in which transaction costs differ and an examination of the economizing properties of alternative institutional modes for organizing transactions. The crucial investment distinction is: To what degree are transaction-specific (non-marketable) expenses incurred? Unspecialized items pose few hazards, since buyers can turn toalternative sources, and suppliers can sell output intended for one order to other buyers. Non-marketability problems arise when specific parties' identities have important cost-bearing consequences. Transactions of this kind are labeled idiosyncratic. The summarized results of the review are as follows. First, firms' distribution decisions often prompt examination of the make-or-buy question: Should a marketing activity be performed within the organization by company employees or contracted to an external agent? Second, manufacturers introducing an industrial product to a foreign market face a difficult decision. Should the product be marketed primarily by captive agents (the company sales force and distribution division) or independent intermediaries (outside sales agents and distribution)? Third, the authors develop a theoretical extension to the basic transaction cost model by combining insights from various theories with the TCA approach. Fourth, other such extensions are likely required for the general model to be applied to different channel situations. It is naive to assume the basic model appliesacross markedly different channel contexts without modifications and extensions. Although this study contributes to scholastic research, it is limited by several factors. First, the theoretical perspective of TCA has attracted considerable recent interest in the area of marketing channels. The analysis aims to match the properties of efficient governance structures with the attributes of the transaction. Second, empirical evidence about TCA's basic propositions is sketchy. Apart from Anderson's (1985) study of the vertical integration of the selling function and John's (1984) study of opportunism by franchised dealers, virtually no marketing studies involving the constructs implicated in the analysis have been reported. We hope, therefore, that further research will clarify distinctions between the different aspects of specific assets. Another important line of future research is the integration of efficiency-oriented TCA with organizational approaches that emphasize specific assets' conceptual definition and industry structure. Finally, research of transaction costs, uncertainty, opportunism, and switching costs is critical to future study.

• Information Systems Review
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• v.11 no.3
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• pp.125-146
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• 2009

The emergence of open source software(OSS) with its most prominent advantages creates a vast interest among practitioners. A study on Linux, the most well-known OSS, estimated that it would cost as 5.4 billion Euros taking over 73,000 person-years if it had been developed by conventional means. However, Linux has achieved only 0.65 percent of the operating system market for individual users while Microsoft windows family counts for nearly 90 percent of the market. Much of the effort being spent in the development of OSS is going to waste and potential value that OSS can bring to users is not being realized. Adoption of OSS is often accompanied by the discontinuance of existing software that is already in place. If users resist changing, they may not adopt OSS. Using the case of Linux, this study examines user resistance to change from the commercial operating software to the free operating system. This study identifies six sub-types of switching costs (uncertainty, emotional, setup, learning, lost benefit, and sunk costs) and tests their effects on user resistance to change based on a survey of 201 users. The results show that user resistance to change has a negative impact on the adoption of OSS. Further, this study shows that uncertainty and emotional costs have significant effects on user resistance to change. Beyond previous research on technology adoption, this research contributes towards an understanding of the switching costs leading to user resistance to change and offers suggestions to OSS practitioners for developing strategies to improve the adoption of OSS.