How Relevant is Transaction Cost Economics to Inter-Firm Relationships in the Music Industry?

This paper applies the transaction cost framework to the organisation of product sourcing and development (PS&D) activities within the popular music industry. Two firm types characterise the industry and this particular set of activities; large multinational firms (`majors') and smaller regionally bound companies (`independents'). We find that the Transaction Cost Economies framework of Oliver Williamson (1985, 1999) provides only a partial explanation for the observed hybrid organisational structures established by the two firm types. A more sensitive model can be achieved by including a number of moderating variables drawn from the socially constructed and situationally dependent idiosyncrasies of the assets involved in the PS&D activities under consideration.

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