Question

1. Draw the Trade-off between Agency Efficiency and Technical Efficiency graph in BLACK.
   1. Define and explain what a relationship-specific asset is.
   2. Explain why a relationship specific asset is critical to the make or buy decision.
   3. Define and explain the technical efficiency curve.
   4. Define and explain the agency efficiency curve.
   5. Why is the "technical efficiency" line above the x-axis?
   6. Why does the "agency efficiency" line cross the x-axis?
   7. How might globalization affect the trade-offs between technical and agency efficiency? On top of the original graph, draw a change from globalization in RED.
   8. How might advances in information technology affect the trade-offs between technical and agency efficiency? On top of the original graph, draw a change from technology in BLUE.

Answer 1

A) Asset specificity is a term related to the Inter party relationships of a transaction.

Assets specificity defined the extent to which the investments made to support transaction particularly have a value higher v to that transaction than they would have if they were redeployed for any other purpose.

Asset specificity is the degree to assest hich can have use across multiple purpose and situations and with a high level of specificity has use in only certain situations . The more specific an asset, the lower its potential resale value or redeployability.

Customized computer software is an example of a highly specific asset

B) Purpose– This work analyses make or buy decisions from the transaction cost economics perspective . The aim is to extend, analyse which the presumptions of the two theories are valid in the service sector in terms of assets specific

Findings–The results indicate that, the relationship between operation performance and assest specificity is weaker when in house the operations are executed.

In the case of the relationship between assest specific and performance, the findings regarding non‐financial performance are not contradictory, it is higher slightly when the operation is outsourced. The factors determining an increase in outsourcing would be those related to the quality of the operation and to non‐financial performance.

Limitations– studies previous not considered the relationship between specificity and performance business, which gives e incentive extra to complement and expand the literature on service operations.

Future research should analyze other theories on outsourcingand organizations. The findings should also be tested in other geographical regions

C) .Technical efficiency refers to how business productive can be given the fewest inputs, resources, necessary to do job. An input is any quantifiable necessary resources to create product or output. Labor is a form of input, as are materials and equipment.

for example, cakes outputting requiresfollowing inputsbakers, ingredients and ovens.

D) Agency efficiency refers to the extent to which the exchange of services and goods in the vertical chain has been organized to minimize the coordination, agency, and transaction costs.