Ownership decisions in plural contractual systems

Abstract

A substantial body of research employs agency theory and transaction costs analysis to explain ownership decisions in distribution channels. Agency theory identifies factors that prompt firms to favor behavior‐based contracting over outcome‐based agreements. Transaction cost economics is a complementary framework which maintains that the organizational form in a location should be the one that economizes on production and transaction costs. Prior research illustrates that independent variables (e.g. proximity to highways, dedicated assets) outlined in these theories provide a partial explanation for ownership decisions. Nevertheless, scant research has analyzed whether factors outlined in agency theory and transaction cost analysis are employed by executives when making ownership decisions. The purpose of this study is to investigate managerial rationales underlying plural contractual networks.