Description
Following the logic of transaction cost economics view, it is the manager?s task to craft governance arrangements with minimal cost that ensure the delivery of the desired quantity, price, and quality of a supplier?s services. The manager, therefore, crafts governance arrangements to match the exchange conditions that accompany various services. As exchange hazards arise, so must contractual safeguards (Williamson, 1985), which act to minimize the costs and performance losses arising from such hazards. As crafting a complex contract is costly, parties undertake such a cost only when the consequences of a contractual breach are considerable (Joskow, 1988; Heide, 1994).