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The determinants of the governance of air conditioning maintenance in Australian retail centres

Bridge, Adrian J. (2008) The determinants of the governance of air conditioning maintenance in Australian retail centres. PhD thesis, Queensland University of Technology.

Abstract

Retail centres are a visible sign of developed capitalist societies and make an appreciable contribution to these economies. For the firms involved in supplying air conditioning maintenance to retail centres, governance structures (that incorporate the make-or-buy decision and the decision concerning the nature of the exchange relationship) are fundamental business decisions. The absence of literature in this area creates a research opportunity to undertake a theoretical and empirical investigation into the determinants of the governance of air conditioning maintenance in Australian retail centres. The research objectives revolve around a microeconomic theory (Transaction Cost Economics) and two related theories – one from strategic management (Resource-Based Theory) and one from a power-based perspective (Resource Dependency Theory).

In terms of the make-or-buy decision, an integrative framework of vertical integration is developed that aims to create a clearer understanding of the conditions under which Transaction Cost Economics (TCE) and Resource-Based Theory (RBT) are dominant. This approach is encouraged by the similarity of the assumptions made in TCE and RBT concerning rationality and which envisage a short term approach to profits. If a wider view is taken, that includes supply chains in which firms take a longer term approach to profits, then Resource Dependency Theory (RDT) can also be considered as a complementary theory to TCE. In order to test TCE on the issue of the nature of the exchange relationship, TCE's contractual schema is developed, along with a new type of asset specificity (Ongoing Asset Specificity).

Case studies and a nationwide postal survey are used to collect data from multiple sources, comprising 51 interviews, the collection of documentary information, as well as 18 completed case study questionnaires and 205 useable survey questionnaires. Multiple research methods allow the relative strengths of different methods to be combined to more effectively test the hypotheses. Pattern matching and regression analysis are the main techniques used to analyse the data.

The results provide a successful testing of the integrative framework of vertical integration. That is, this framework is shown to be more powerful in accounting for the make-or-buy decisions in the supply chains in this thesis, than the singular deployment of either TCE or RBT. With regard to the nature of the exchange relationship decision, the results also support the development of TCE's contractual schema and Ongoing Asset Specificity. Through the incorporation of these developments, TCE outperforms RDT across all of the internal and external exchanges in the supply chains in this thesis. In total, it is concluded that transaction costs and production costs can both be key determinants of the governance of air conditioning maintenance in the chain that supplies this activity to Australian retail centres. Moreover, and in this chain, upstream exchange relationships are not determined by downstream external exchange relationships.

The implications of the results for practice - in more mainstream construction, and concerning the make-or-buy decision, particularly concern trades in close physical and intellectual proximity to the main contractor’s key activity of planning and coordinating site activity. Here, the results indicate that main contractors would benefit from focusing on the possibility of hold-up and not production cost improvements. With respect to external relationships, the results show that even when clients have an ongoing requirement for an activity, a discrete exchange can be both economical and effective. This suggests that calls by some government sponsored reports for all clients buying services from main contractors to seek a relational exchange are not justified. In terms of the firm's internal relationships and upstream external relationships, the evidence from this thesis is that these relationships should not necessarily be determined by the firm’s downstream external relationships. Here, for example, main contractors might not allow their exchanges with their staff and subcontractors to be determined by exchanges with their clients.

More specifically, this thesis suggests that main contractors can prosper from developing relational exchanges with their staff, core subcontractors and suppliers despite engaging in discrete and arms-length exchanges with their clients. This finding may encourage main contractors to help move mainstream construction away from any "command and control" image.

Impact and interest:

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ID Code: 17214
Item Type: QUT Thesis (PhD)
Supervisor: Skitmore, Ronald& Then, Danny
Keywords: transaction costs, capability and competence, power and dependency, air conditioning maintenance, retail centres
Subjects: Australian and New Zealand Standard Research Classification > CHEMICAL SCIENCE (030000) > PHYSICAL CHEMISTRY (INCL. STRUCTURAL) (030600)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Institution: Queensland University of Technology
Deposited On: 23 Jan 2009 08:56
Last Modified: 29 Oct 2011 05:51

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