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Jill E. Hobbs: Jill E. Hobbs is based at Excellence in the Pacific Research Institute, University of Lethbridge, Lethbridge, Canada, and Faculty of Management, The University of Calgary, Calgary, Canada
Introduction
Supply chain management is a rapidly evolving area of interest to academics and business management practitioners alike. Aspects of marketing, economics, logistics and organizational behaviour are all important for developing insights into how and why different supply chain management arrangements emerge and for understanding the consequences of these arrangements for industry efficiency and competitiveness. When undertaking any analysis, it is helpful to have a framework within which to work and from which testable hypotheses can be drawn. A theoretical framework enables predictions to be made about the likely outcomes of different business strategies and public policy initiatives. It enables observed business behaviour to be evaluated and therefore provides better explanations of the motivations for firms' behaviour and the consequences for efficiency within a supply chain.
This paper discusses a theoretical framework for the study of supply chain management which is drawn from the economics literature. Transaction cost analysis (TCA) represents one possible approach to understanding and evaluating supply chain management and has the potential to be combined in an interdisciplinary setting with the insights provided by the marketing, logistics and organizational behaviour literatures. The purpose of this paper is to provide those interested in supply chain management, but who are not familiar with TCA, with an overview of this approach and to discuss methods of applying the theory empirically.
Economics and supply chain management
Business people, academics who teach and study management and others interested in the operation of supply chains often express frustration with how few insights economics appears to provide them. Although it is not always obvious, the source of this frustration lies in the assumptions underlying the ruling neoclassical paradigm used in economic analysis. Most economic studies of markets, industries and firms use this theoretical approach. Central to neoclassical theory is the concept of a single product firm, operating in a perfectly competitive industry with a large number of competitor firms all producing the same product under the same cost conditions and all facing the same market demand curve. (Of course, neoclassical theory has been successfully extended to cover monopolies and,...