Inderscience Publishers

Emergence of the supply network in Finnish industry: experiment in theoretical reconstruction

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This paper analyses the formation of supply chains in the Finnish telecommunications and metal industries using transaction cost theory as an analytical device. The purpose is to cope with different issues associated with networking decisions in such dyad relations where asymmetric large buyers and small subcontracting firms negotiate interfirm cooperation with each other. In the first part of the paper, a transaction cost (TC) framework is introduced in order to grasp theoretically the most critical elements of a typical dyad subcontracting decision. The second part of the paper makes an attempt to shed some new light on the rarely studied empirical transaction cost economics. Our sample consists of 11 Finnish companies from which the data has been gathered through in-depth interviews. Its purpose is to describe how the networks have emerged and developed during the past years using our TC-framework as a theoretical device.

Keywords: transaction costs, network, supply chain, supplier network, Finland, telecommunications industry, metals industry

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