International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss


Asset-specific Relations as Inter-firm Transaction Structures: A Qualitative Study
Reza Azarian

This article investigates the characteristics of the flow of continued transaction between a plastic manufacturing firm and its key supplier of injection moulds. Using qualitative data collection methods, it focuses on some of the risks and uncertainties perceived by the plastic producer firm in order to explore the effects of these perceptions on the firm’s choice of transaction structure. The main finding of the investigation suggests that – despite the vulnerability of the firm stemming from the relatively high level of asset specificity that characterises the object of transaction – the firm is rather reluctant to integrate this flow and that instead prefers to organise it in form of a long-term, non-contractual, trust-based relation with the mould supplier. The rationale for this preference is that a backward integration is perceived by the firm as a source of uncertainty and vulnerability rather than providing shield against risks and hazards uncertainty, and that the already existing and well-functioning relation with the mould supplier performs the most important functions of vertical integration, and does so without the costs and uncertainties involved in such a move.

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