Towards a Transaction Cost Theory of Management Control

25 Pages Posted: 20 Feb 2003

Date Written: June 2002 3,

Abstract

In this paper, I present and discuss a theory of management control based on Transaction Cost Economics. This theory specifies the composition of various archetypal control structures, and links these to their respective habitat. These are: (1) arm's length control; (2) machine control; (3) exploratory control; and (4) boundary control. The gist of the argument is that activities predictably differ in the control problems to which they give rise, whereas control archetypes differ in their problem-solving ability, and that alignments between the two can be explained by delineating the efficiency properties of the match. This approach has some interesting qualities. Its relatively simple theme seems to speak to a wide empirical domain, and can be used to make sense of a large set of different control practices. Furthermore, it offers a practicable way to address control structure effectiveness. Finally, the approach is empirically testable.

Keywords: management control theory, transaction cost economics

JEL Classification: M, M41, M49, D23, M21

Suggested Citation

Spekle, Roland F., Towards a Transaction Cost Theory of Management Control (June 2002 3,). Available at SSRN: https://ssrn.com/abstract=370970

Roland F. Spekle (Contact Author)

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

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