Toward a Transaction Cost Theory of Organizational Change in Transitional Agriculture

This paper is aimed at determining the applicability of transaction cost theory to explain the organizational change in transitional agriculture of Central and Eastern European countries. Motivation for this research is provided by the fact that agricultural enterprises with minimal transaction costs of governance (family farms) do not exhibit superior efficiency and did not come to dominate over large-scale farms in this region. To explain this fact, this paper (1) expands the transaction cost theory by introducing the distinction between organizational form-related and institutional environment-related transaction costs, and (2) identifies several limitations on the applicability of transaction cost theory to transitional conditions.