Below are a number of multiple choice questions relevant to this chapter. There are two to three variations on the same questions. Each question has four options; the correct answer is written in the final column. Some questions are very simple, while others are much more difficult; this should be taken into account when setting quizzes or exams.
For each of the following questions, read each question carefully and then choose the answer you believe is most correct:
Question and options | # | Ans. |
Which of the following forms of governance does Transaction Costs Economics (TCE) consider? a. vertical b. diagonal c. linear d. triangular | 1 | |
Horizontal integration occurs: a. when a firm competes with another b. when a firm outsources to another c. when a firm is dissolved d. when a firm acquires or merges with another | 2 | |
Vertical integration occurs: a. when a firm competes with another b. when a firm outsources to another c. when a firm moves into activities that were previously undertaken by a supplier or a customer d. when a firm acquires or merges with another | 3 | |
Outsourcing occurs when: a. activities that were previously undertaken by the firm are moved to outside suppliers b. firms take over sourcing things themselves that they previously bought c. a firm undergoes innovation d. none of the above | 4 | |
The alternative to market transactions in TCE is: a. barter b. gifts c. employment contracts d. potlatch | 5 | |
According to TCE, the boundary of the firm is ______. a. defined by real estate b. defined by geography c. defined by economic considerations concerning make or buy, internalizing or externalizing activities d. none of these | 6 | |
The ‘father’ of TCE is: a. Karl Marx b. Hamish McTaggart c. Ronald Coase d. Henry Mintzberg | 7 | |
TCE postulates that human actors are characterized by ______, ______ and ______. a. creativity/opportunism/strategic foresight b. bounded rationality/bounded business units/unbounded energy c. bounded rationality/opportunistic behaviour/feasible foresight d. none of these | 8 | |
What is TCE’s key question? a. whether transactions should be coordinated within a firm or across markets b. whether rationality is bounded enough c. whether to invest more in innovation d. all of these | 9 | |
Bounded rationality means: a. we never have perfect knowledge and hence can never be perfectly rational b. we are irrational by nature c. we cannot be rational because we are forgetful d. gaining advantage by being economical with, or even distorting, what we take to be the truth | 10 | |
Opportunism means: a. breaching the spirit of a contract for self-interest b. being serendipitous c. being biased d. managerial corruption | 11 | |
Feasible foresight means that parties to a contract have the capacity to: a. think about the potential future conduct of the other party and integrate those insights into the ex-ante design of governance b. generate a list of feasible and unfeasible futures c. use strategic models to gain foresight about the future conduct of the other party d. generate governance models that work for both parties | 12 | |
In TCE uncertainty means: a. being lost in the detail b. not being able to control the contingencies of contracts c. being irrational in planning d. none of these | 13 | |
Problems in evaluating performance according to the terms of contracted outcomes are called ______ by TCE. a. technological uncertainty b. volume uncertainty c. behavioural uncertainty d. radical uncertainty | 14 | |
In TCE, asset specificity means: a. the degree to which an asset is specific to use or user b. the degree to which an asset can be traded c. the degree to which an asset can be valued d. none of these | 15 | |
What is Lionel Messi’s asset specificity? a. his #10 shirt b. Adidas boots c. scoring goals d. all of these | 16 | |
Transaction frequency refers to ______. a. the rate at which funds are transferred after completion of a contract b. the number of people employed to negotiate a contract c. the number of products being transferred within a single contract d. none of these | 17 | |
Williamson says that market failure problems that result from contracting through vertical integration can be solved through ______, ______ and ______. a. organizational design/innovation/creative destruction b. information flows/negotiating costs/incentive alignment c. managing uncertainty/being boundedly rational/being fast to market d. none of these | 18 | |
What is concurrent sourcing? a. using different suppliers b. using different investors c. using both bounded rationality and uncertainty d. using both making and buying | 19 | |
When does Parmigiani argue that make-and-buy is likely? a. when making is expensive b. when outsourcing is difficult c. when the level of asset specificity is mediocre d. when the level of asset specificity is low | 20 | |
What types of organization did Ouchi add to markets and hierarchies? a. clans b. tribes c. fiefdoms d. slavery | 21 | |
When does TCE argue outsourcing will occur? a. when asset specificity is low b. when asset specificity is medium c. when asset specificity is high d. none of these | 22 | |
What is an advantage of large, well-resourced firms in their attempts to innovate? a. They can simply take over innovative new and small firms. b. They have more creative people. c. both of the above d. none of these | 23 | |
TCE has been criticized for its ______ view of markets. a. over-socialized b. under-socialized c. uncertain d. none of these | 24 | |
According to Adam Smith, ______. a. TCE developed out of markets b. markets developed out of monopolies c. monopolies developed TCE d. none of these | 25 | |
Which of the following have been levied as criticisms of TCE? a. TCE focuses on cost minimization. b. TCE understates the cost of organizing. c. TCE neglects the role of social relationships in economic transactions. d. all of these | 26 | |
Which of the following are benefits of horizontal integration? a. reduced competitive intensity b. lower production costs through economies of scale c. increased differentiation by eliminating similar products or services in the market d. all of these | 27 | |
According to van Marrewijk, ______ is largely a matter of ______. a. acquisition/money b. vertical integration/strategy c. culture/horizontal integration d. horizontal integration/culture | 28 | |
According to van Marrewijk, the central M&A dilemma that he researched was: a. how to integrate newly acquired internet firms while preserving their organizational autonomy and capacity for innovation b. how to integrate new internet technology and transfer knowledge to the acquiring firm c. how to integrate different organizational cultures after a merger d. how to integrate different information systems after a merger | 29 | |
According to van Marrewijk’s study, the lesson for M&A’s is: a. getting the right deal at the negotiating stage is crucial b. managing the integration of it systems is crucial c. managing the clash of cultures is crucial d. integrating the two organizational cultures destroys the very reason for the strategic decision to merge in the first place | 30 | |
Revitalization, as a potential phase in the process of integration, refers to the process through which employees: a. forget about their cultural roots and embrace new norms and values b. talk about the past to keep cultural myths alive c. embrace the new values of the merged organization d. seek to restore the cultural values of the past | 31 | |
A transaction is ______ while ______ is ______. a. a cost/value/an asset b. an event/strategy/a sound plan c. a cost/strategy/long-term d. an event/strategy/a process | 32 | |
________ involves(s) externalizing an activity that was previously conducted in the organization. a. Dis-integration b. Outsourcing c. Strategic scoping d. Strategic foresight | 33 | |
Institutional theory suggests that firms choose hierarchy over markets because ______. a. it is more efficient b. it is functionally necessary c. it is culturally familiar d. it is easier | 34 | |
Markets, hierarchy and ______ are alternative ways of organizing. a. networking b. contracting c. sensemaking d. all of these | 35 | |
Outsourcing is an example of ______. a. coercive isomorphism b. normative isomorphism c. mimetic isomorphism d. all of these | 36 | |
Which of the following promoted outsourcing as a strategy? a. Marxism b. liberalism c. shareholder value d. stakeholder activism | 37 | |
“Nikefication” is a strategy for ______. a. building global supply chains b. making products from sub-components sourced from different suppliers c. separating design and production d. managing complex projects | 38 | |
______ means eliminating parts of the production system that can be better, or more cheaply, contracted to another company that is a specialist in this area. a. Outsourcing b. Benchmarking c. Offshoring d. Product elimination | 39 | |