Chang, C; Ive, G; (2000) A Comparison Of Two Ways Of Applying Transaction Costs Approach(I): Methodological Debates. The Bartlett Faculty of the Built Environment, UCL (University College London): London, UK.

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Abstract

Whilst the importance of transaction costs in construction has been accorded pervasive recognition, the methodologies used to apply this concept to the analysis of the construction process have been divergent. One way starts from searching for quantifiable items of transaction costs and explores the link between these costs and procurement routes. This paper claims that the attempt to provide explanatory foundation for construction procurement behaviour by quantitatively measuring each important element of transaction costs in the construction process is highly unlikely to succeed, since the majority of costs with comparative importance are fairly difficult, if not impossible, to estimate. A possible way to avoid thi s pi t f al l i s t o f ol l ow Wi l l i amson’ s met hodol ogy of c omparative institutional analysis. In this context, we take this to involve operationalising the theory by predicting , for transactions with defined attributes, ordinal differences in transaction costs between inst i t ut i ons ( pr oc ur ement r out es) , and t hus, under a ‘ weak’ profit maximising assumption, to derive and test refutable hypotheses concerning the probability or relative frequency of use of each route .

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