Asset Specificity

Lastly, the third attribute refers to the specificity of the assets involved in the trans­action. Assets are specific if their return depends on the continuity of a specific transaction. The more specific the asset, the greater the agents’ dependence on achieving the negotiation and therefore the greater the loss from an opportunistic behavior by one of the parties.

Williamson (1985) also proposes classifying the different ways a given transac­tion is performed, starting with the spot market, continuing with long-term con­tracts and concluding with the hierarchy (a single firm securing the transaction in question). If the asset specificity is null, the TCs are negligible, requiring no con­trol over the transaction; therefore, the spot market would be more efficient than other organizational forms. If, instead, the asset specificity is high, the costs asso­ciated with breaching the contract will be high, which would imply greater control over the transactions.

Also according to Williamson (1981), asset specificity is the most important critical dimension, as it is related to the type of investment. Thus, after perform­ing the specific investment, the seller and the buyer will operate in a bilateral exchange relationship for a considerable period of time (irreversibility cost). Williamson (1991a, b) discriminates six types of asset specificity:

a. locational: those whose application in a given transaction generates cost sav­ings in transport and storage, meaning specific returns to these productive units;

b. physical: those more suitable for a specific purpose (e. g., specific inputs for the production of a specific product);

c. human: related to the use of specialized human capital for an activity. This type of specificity is related to accumulated knowledge by the continuous execution of a particular activity;

d. dedicated: specific assets for a given transaction (e. g., to service a specific customer);

e. brand: refers to capital—not physical or human—manifested in a company’s brand, which is particularly relevant in the franchising world; and

f. temporal: refers to the value of the assets related to the period when the trans­action is processed. Thus, this asset becomes especially relevant in the case of negotiating perishable products.

According to Azevedo (2000), as it is not possible to determine a relationship that contains all eventualities, in some cases, renegotiation is inevitable. However, as an opportunistic behavior is a possibility, this renegotiation is subject to one of the parties taking advantage of the gains, which in turn results in losses to the other party. Thus, in economic transactions, based on the issue of opportunism, one side could try to take advantage of the other due to the impotence of predicting future events. Hence, agents often have to resort to safeguard contracts, which in turn contribute to increase some TCs.

There are some forms reported in the literature that enable controlling the prob­lems of post-contractual opportunism, namely increase the resources to monitor transactions, reduce information asymmetry, and adopt contractual incentives rewarding the agents’ compliance or good performance. The vertical integra­tion itself can eliminate conflict of interest, especially in transactions between an organization and its suppliers, reducing TC, though this integration could increase operating costs (Bonfim 2011).

On account of the intrinsically qualitative competitive process, the literature generally does not address the governance structures and the theory of competi­tiveness. This supposes, mistakenly, that the coordination of supply chains occurs efficiently or that more efficient structures through mechanisms associated with competitive rivalry are used (Farina 1999).

Coutinho and Ferraz (1995) pointed out that strategies are the basis of the dynamics of competitiveness, which seek to expand and renew the companies’ capacity required by the standards of competition (or “rules of the game”) in the market they are embedded.

Buainain et al. (2007) deem that competitiveness will only be achieved by including practices that encourage cooperation between the economic agents of a supply chain, including the government. According to the authors, considering that a company’s competitiveness is linked to the system it is inserted in could mean significantly changing the way such company views and manages its business. Thus, the authors emphasize the importance of vertical and horizontal manage­ment within a system to gain competitiveness. According to Buainain et al. (2007), a serious problem is the lack of works and experiences that report the problems of internal management in the family farmers’ network, as well as the relationship between them and their customers and suppliers.

Thus, competitiveness is reflected by these companies’ greater or lesser ability to adopt governance structures that reduce TC, enable greater integration with the agricultural production, and set conditions for systemic competitiveness (Batalha and Souza Filho 2009).

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