The impact of firm-specific assets and the interaction of uncertainty: an examination of make or buy decisions in public and private hospitals

• Published in: Journal of economic behavior & organization Vol. 36; no. 3; pp. 383 - 409
• Main Authors: W. Coles, Jerilyn, Hesterly, William S.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 30.08.1998; Elsevier; North-Holland Pub. Co; Elsevier Sequoia S.A
• Series: Journal of Economic Behavior & Organization
• Subjects: Assets; Buy or make decisions; Contracts; Economic models; Economic theory; Hospitals; Krankenhaus; Make-or- Buy-Entscheidung; Private hospitals; Specific assets; Studies; Theorie; Transaction costs; Transactions; Transaktionskosten; Uncertainty; USA; United States > US; Uncertainty; Hospitals; H32; L22; Transaction costs; L14; Contracts; Specific assets
• ISSN: 0167-2681; 1879-1751
• DOI: 10.1016/S0167-2681(98)00102-4

This study examines the impact of uncertainty, as articulated in the transaction cost economics framework, and its interaction with asset specificity in determining make or buy decisions. Our analysis of a sample of over 2900 transactions supports the view that in the presence of specific assets increased uncertainty will induce firms to integrate at lower levels of asset specificity. We also find that transaction cost explanations are subject to contextual factors. In particular, the results support transaction cost predictions for private hospitals, but not for public hospitals, where market efficiency pressures are not as strong.