Strategic Management Theory - Research Propositions

The Strategic Management and Transaction Cost Nexus: Past Debates, Central Questions, and Future Research Possibilities

Nicolai J Foss
Forthcoming, Strategic Organization, 2003


Proposition 1: In industries where the probability that firms will exploit their market power (e.g., through predatory pricing) is high, buyers and sellers are more likely to enter into long-term supply agreements than in industries where the probability is smaller.
Proposition 2: In industries where the costs of contracting are high, firms will exploit their market power (e.g., through predatory pricing) to a larger extent than in industries where contracting costs are low.
Proposition 3: In industries in which consumers/users and firms can orchestrate their protection efforts at low cost (e.g., because they are few in number, are particularly well organized, have clearly defined shared interests, etc.), there will be more product upgrading, product differentiation, price discrimination, and
signaling on the part of would-be monopolizers than in industries where it is more costly to orchestrate protection.