Towards A Synthesis of Transaction Cost Economics and a Feminist Oriented Network Analysis: An Application to Women's Street Commerce

American Journal of Economics and Sociology, The, Oct, 1999 by Anne De Bruin, Ann Dupuis

ANN DUPUIS [*]

ABSTRACT. This paper suggests the possibility of an interdisciplinary, tripartite merger of transaction cost economics and the concept of embeddedness, with feminist insights. It demonstrates that in isolation, a simple application of transaction cost analysis can offer an adequate explanation of economic activity. The explanatory power of this approach however, is enhanced when complemented by greater recognition of the importance of the social context in which economic activity occurs. This paper uses research from New Zealand's largest street market to examine women's work in street commerce, a sub-sector of the informal sector. Aspects of transaction cost analysis are applied to activities of women market vendors. It is proposed however, that the approach we take which considers the embeddedness of economic activity in ongoing networks of social relations, and the intertwining of economic with non-economic goals, is compatible with aspects of feminism. Novel features of the analysis include the applicatio n of transaction cost analysis to informal sector activity and a synthesis of this approach with a feminist oriented network analysis.

I

Introduction

TRANSACTION LOST ANALYSIS, a core aspect of the New Institutional Economics, has achieved prominence chiefly through the work of Williamson (1975, 1985, 1994). Initially referred to by Coase (1937) as marketing costs, transaction costs have been widely incorporated into economics. Transaction cost economics offers an alternative view of economic behavior from that of the mainstream neoclassical approach. Although Williamson himself acknowledges that transaction cost economics has "enormous explanatory power" (1986, xviii) most analyses have been contributions to the theory of the firm and industrial organization, and have chiefly emphasized contractual relations at the institutional level, particularly those of markets and hierarchies (see for example Casson 1996). There is now a growing body of literature that attempts to study empirically the validity of the central theses of transaction cost economics. Articles in a recent special issue of the Cambridge Journal of Economics, on contracts and competition, f or example, have examined variations of transaction costs across both firms and industries (Maher 1997) and also drawn attention to the managerial perceptions of transaction costs versus fully recognized transaction costs (Buckley 1997).

There has also been a parallel growth in the literature recognizing the importance of networks in organizational permutations (Granovetter 1995; Podolny and Page 1998). Valuable empirical research has been undertaken on the existence of these networks in such diverse areas as, for example, the apparel industry (Uzzi 1996, 1997), bio-technology (Barley et al 1992; Powell and Brantley 1992) and financial services (Podolny 1993, 1994). Furthermore, a torrent of strategic management literature has emerged focusing on the significance of the ties and alliances between organizations, although it appears that until Gulati (1998) the literature in this area had given greater recognition to dyadic interactions rather than more broadly based social networks.

To date, attempts at integrating the two strands of transaction cost economics and social network perspectives have been limited. A notable exception to this however can be found in Jones et al(1997). Correspondingly, attempts rarely have been made to apply transaction cost economics to the study of informal sector activity. Here too Uzzell (1994) stands out as an exception. A further gap exists in the linking of either of these two approaches to work of a feminist orientation. In part, this paper is an attempt to mitigate these gaps and so break down what we see as unnecessary barriers between the disciplines. The approach taken therefore constitutes an attempt at developing an interdisciplinary direction. Thus rather than focusing on the discrete features of distinct approaches, we highlight instead areas where we see the compatibility and convergence of perspectives.

To explore our ideas, we draw on interview data gathered from a sample of women vendors at the Otara Flea Market, New Zealand's best known and largest example of street vending activity. Our choice of street commerce as a vehicle for illustrating the interdisciplinary potential of our analysis was intentional, given that street commerce is one of the most elementary forms of market exchange in developed economies. It thus provides a remarkably clear and uncomplex setting through which our argument can be developed.

The starting point of our analysis is a demonstration of the value of a simple application of transaction cost analysis that is shown to offer a logical, though rather narrow explanation of aspects of the economic activity of women involved in street commerce. In particular, we focus on the applicability of transaction costs economization and the behavioral assumption of bounded rationality, two key components of transaction cost analysis. While establishing the usefulness of both these concepts, we nevertheless show that there are other equally important considerations that transaction cost economics does not allow for. Here, we incorporate Granovetter's notion of embeddedness, which, we argue, takes into account the social and relational context in which the women vendors operate. We believe that this concept sits comfortably with, and therefore enhances the value of transaction cost analysis (Granovetter 1985, 1990, 1992a, 1992b).