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Inter-Organizational Trust as a Shift Parameter in the Extended Transaction Cost Framework: A First Application to the LNG Industry
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1028-3625
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EUI RSCAS; 2010/18; Loyola de Palacio Programme on Energy Policy; [Florence School of Regulation]; [Energy]
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RUESTER, Sophia, Inter-Organizational Trust as a Shift Parameter in the Extended Transaction Cost Framework: A First Application to the LNG Industry, EUI RSCAS, 2010/18, Loyola de Palacio Programme on Energy Policy, [Florence School of Regulation], [Energy] - https://hdl.handle.net/1814/13579
Abstract
This paper provides an empirical analysis examining the effect of both transaction characteristics and
the institutional environment on governance choice. Using a dataset of 237 corporate-specific value
chains in the global LNG industry, we introduce inter-organizational trust as a shift parameter.
Following transaction cost economics, it is hypothesized that specific investments under uncertainty
provide incentives to integrate vertically. Second, it is argued that inter-organizational trust changes
the relative costs of vertical integration and non-integration and supports less hierarchical
organizational structures. These economic relationships are tested based on probit and ordered probit
models. Estimation results provide broad support for both propositions