Economists' perceptions versus managers' decisions: an experiment in transaction-cost analysis

Are the perceptions of professional economists on transactioncosts consistent with make-or-buy decisions made within firms?The answer may have important implications for transaction costresearch. Data on firms' outsourcing during the new productdevelopment process are taken from a large-scale survey of UK,German and Irish manufacturing plants, and we test the consistencyof these outsourcing decisions with the predictions derivedfrom the transaction cost perceptions of a panel of economists.Little consistency is evident between actual outsourcing patternsand the predictions of the (Williamsonian) transactions costmodel derived from the panel of economists. There is, however,evidence of a systematic pattern to the differences, suggestingthat a competence or resource-based approach may be relevantto understanding firm outsourcing, and that firms are adoptinga strategic approach to managing their external relationships.