THE IMPACT OF TRANSACTION COSTS ON OUTSOURCING CONTRACTS: THEORETICAL ASPECTS

Abstract

The reduction of transaction costs prompts higher requirements and results in split of resources and production for an enterprise. However, in the process of globalisation, when trade barriers are falling down, transaction costs are becoming an increasingly important issue. Transaction costs are connected with searching and upholding reliable business partners, negotiation, formation of the contract and its control. For evaluation the negative factors of the economic decline, it is discussed whether it is worth joining in associations and making different procurement transactions during this period of the economic decline. Most companies in this period concentrate their effort on survival, but not on development, so business initiative obviously shrinks during such economic periods. What is more, it is significantly limited by increasing costs for credits and low liquidity of the stock markets. That is why transaction costs emerge because of the formal trade barriers such as import restrictions and tariffs. Transaction costs are inevitable as well as transport costs, and they take the significant part of all costs of any contract. Transfer costs economics, which previously was mostly used for the evaluation of outsourcing decision processes, now is considered to be an applicable theoretical background for outsourcing decisions.