Marketing channels and transaction cost analysis: the role of transaction specific investment

Researchers have theorized that Transaction Cost Analysis paradigm draws a connection between transaction specific investment and opportunism with guile. This dissertation investigated this relationship during and after the negotiation process with a focus on contractual safeguarding.

It was hypothesized that the pattern of the level of anticipated investment in transaction specific investment was related to choice of governance clause (i.e., contractual safeguarding) in the final negotiated contract. Additionally, it was hypothesized that anticipated investment in transaction specific assets would be related to the amount of opportunism (operationalized as falsity) prevalent in the negotiation process. Also, it was hypothesized that after the contract was formed, the resultant investment in transaction specific assets was inversely related to opportunism (operationalized as a reduction in contract performance quality). Anticipated and resultant investment differ in that anticipated investment is proposed and not committed while resultant is not only committed investment but also includes the investment that would result with the enforcement of the negotiated contract clauses. These relationships were tested using a negotiation simulation utilizing working MBA students as subjects.

It was found that the pattern of the level of anticipated investment was related to final negotiated contract clause choice. The anticipated investment level patterns and final negotiated contract clauses were related as follows:

1. anticipated symmetric low investment was related to a market forces form of contractual safeguarding,

2. anticipated symmetric high investment was related to a bilateral form of contractual safeguarding,

and

1. anticipated asymmetric investment patterns were related to unilateral clauses favoring the high investor.

It was concluded that even in a climate of win-win negotiations and emphasis on trust building, that parties to a contract still desire contractually based safeguards appropriate to their anticipated investment in transaction specific investment.

No relationship between anticipated investment level and opportunism in the form of falsity in communications was found. Despite the rejection of this hypothesized relationship, it was concluded that one cannot depend on the anticipation of investment to serve as a disincentive to opportunism in the form of falsity in the negotiation process.

No relationship between resultant investment level and opportunism in the form of reduction of quality performance was found. Despite the rejection of this hypothesized relationship, it was concluded that one cannot depend on the presence of resultant investment to serve as a disincentive to opportunism in the form of reduction of quality of contract performance.

Contributions derived from this research included a disclosure/falsity scale survey items and a content analysis system for rating false communications ranging from bluffing to lying.