Transaction cost theory of the firm and community forestry enterprises

Published Date
May 2014, Vol.42:1–7, doi:10.1016/j.forpol.2014.01.006

Author 

Dora Carias Vega ^a,b,,

Rodney J. Keenan ^a,b

aDepartment of Resource Management and Geography, Melbourne School of Land and Environment, 221 Bouverie St, Carlton, VIC 3053, Australia

bUniversity of Melbourne, Melbourne, Australia

Received 28 June 2013. Revised 27 January 2014. Accepted 31 January 2014. Available online 22 February 2014.

Abstract

The share of production and processing acquired by community forestry enterprises (CFEs) in the forest products and service industries has increased considerably in developing countries. This paper is a review article that analyzes the importance of both vertical integration and governance of economic activity for communities aiming to benefit from commercial forestry. Transaction cost economic theory serves as a basis for the analysis. Organizational forms, also known as governance structures, set order and provide for mutual gain in commercial exchanges between parties. One of the most important tasks of economic governance is to reduce transaction costs stemming from opportunistic behavior from one or both of the transacting parties. Governance structures exist in a continuum with the market and the firm at opposite ends of the spectrum. A ‘firm-type’ organization is only one possibility in a continuum of enterprise governance structures. The Mexican experience with CFEs corroborates the existence of a range of governance forms that exhibit some of the characteristics described by TCE theory. The paper reflects on the transaction cost implications of these governance structures for a range of vertical integration levels in Mexican CFEs.

Keywords

Transaction costs

Community forestry enterprises

Vertical integration

Mexico

Latin America

Theories of the firm

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  Corresponding author at: Department of Resource Management and Geography, 221 Bouverie St., Carlton ,VIC 3053, Australia. Tel.: + 61 424875445.

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