Transaction Costs, Norms, and Social Networks

This qualitative study looks at the complex relationship of transaction costs, norms, and social networks through a comparison of industrial buyer-seller relationships in the United States and Mexico. Despite arguments by transactioncost theorists that the nature of cooperation in business is largely a function of the nature of investments in transaction assets, this article illustrates several cases where the economic logic is attenuated and a mutual orientation develops as the social structure promotes greater trust either because of shared norms or network ties. It also suggests that asset specificity may at times be a product of the social structure in which the transaction is embedded. The article develops theoretical propositions and suggests directions for future research.