Competitive Trust Contracting And Transaction Cost Economy

Abstract

Evolutionary and spiral acquisition are currently trends in use for acquisitions where the outcomes are uncertain. This paper looks beyond these processes to a concept emphasising trust and transparency within a transaction cost paradigm trust contracting. The evidence suggests that in this experimental trust contracting case study, there was a transaction cost advantage to the buyer of 55% over that of existing high tech acquisition processes. Where the end product (good or service) is largely unknown at the time of contract signature, trust contracting provides transparency and contractual safeguards for both contracting parties, and offers an alternative form of corporate governance which makes use of trust to improve buyer-seller relationships and outcomes for both, allocates risk according to the party best placed to carry the risk, speeds completion of contractual arrangements, and reduces transaction costs for both parties.