Barriers related to the initiation and accomplishment of inter-organisational innovation activities occur due to the fact that actors need to make efforts to handle uncertainties by opening up their institutional borders (Williamson, 1985). These efforts can be subsumed under the term “transaction and coordination tasks”. A transaction is an agreement carried out between several actors, often involving the exchange of items of value (Walker and Weber, 1984; Williamson, 2005). Failures arising during this process are explained by transaction cost theory, which is classified within the field of new institutional economics (Erlei et al., 2007). New institutional economics considers additional costs arising which occur in connection with transactions – such as coordination costs. Transaction costs are cost based on the division of labour for the clarification, agreement and control of the production or distribution of a good or service (Theuvsen, 1997). Whereas coordination costs are expenditures and opportunity costs for the information procurement. They are comprised of transaction costs and costs for the organisational structure (Windsperger, 1996). In comparison, neoclassical theories assume complete market transparency. Goods and services are interchanged without recognition of additional costs which occur on top of the expected price. Coase (1999), (who introduced transactions costs into economic theory), causes the existence of firms by the costs of market utilisation. Firms exist since market utilisation costs are higher than firm's internal hierarchical utilisation costs (Voigt, 2002). The transaction cost theory provides an explanatory approach regarding the making of decisions to carry out transactions in the market, corporation internal or that relate to preferring a hybrid organisation mode (Erlei et al., 2007). In this regard three kinds of transaction cost categories need to be considered (Richter and Furubotn, 2003):

• Searching- and information costs:

Eligible transaction partners have to be found; therefore, prices and the quality of potential transaction partners have to be compared,

• Bargaining- and decision costs:

Expenditure for the exchange of rights of disposal – such as drawing up agreements, agreement negotiations, taking legal advice, preparation of information,

• Policing- and enforcement costs:

The observance of agreements has to be controlled.

 

 

If actor(s)¹¹ recognise a lack of resources in order to put an innovation activity into action, they need to make a decision on the degree of organisational integration of external resources with the aim of bringing about the planned innovation activity (see Table 3). The degree of organisational integration can be placed on a continuum between market-based transactions and hierarchical modes of full integration (Batterink, 2009). The choice of the suitable organisational mode depends, as well, on strategic objectives (Grant and Nippa, 2006).

 

Table 3: Degree of organisational integration of resources and competences (based on Batterink, 2009; Grant and Nippa, 2006)

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