How Important are Transaction Costs for Service Firm Integration Decisions? A Meta-analysis

As the global economy becomes more service-based, the need to understand how service firms govern different activities has become increasingly important. Transaction Cost Theory (TCT) has long been a key perspective on the integration of different activities. TCT asserts that the costs surrounding exchanges, called transaction costs, direct managers' decisions about whether or not to integrate. We take a step towards understanding whether transaction costs play a role in service firms' integration decisions by aggregating results from 28 studies involving 31 samples via meta-analysis. The results reveal that TCT offers limited explanatory power for service firms' integration decisions, and that TCT requires augmentation with other theories in order to explain how service firms govern such activities.