Formal Contractual Agreements: A Transaction Cost Study of Tanzania Firms

Abstract

This is exploratory study that aims at examining formal contractual agreements for firms in Tanzania using Transaction cost theoretical approach. Transactioction cost studies have rarely being done on firms in Africa and Tanzania in particular. Sampling frame is from Tanzania revenue authority records for registerd business 2008-2010. The study is centred on business - to business buyer -seller relations. Primary data were collected from buying side of this business relationship.Random sample of n =150 buyers were contacted through telephone calls and questionnaire were delivered personally. The response rate was about 65%.

The findings suggest Transaction cost theoretical framework to be highly consistent with previous findings in western setting inspite of using Tanzania as context. However there were some slight differences which could partly be explained by study limitations.

Keywords: formal contractual agreements, asset specificity, environmental uncertainty, buyer

dependence