Study On Project Contracting Joint Venture Based On The Theory Of Transaction Cost

In the beginning10years of the new century, the project contracting industry inChina developed so rapidly that it could adapt to the project management models tosome extent. In the international engineering market, China’s engineering contractingcompanies were promising and encountered some challenges as well. In order to adaptto the needs of engineering contracting, the joint venture has gradually become astrategic mode. The thesis studies issues of the joint venture based on the transactioncost theory.Firstly, the thesis briefly reviews basic concepts of the transaction cost theory,including the meaning of trading and transaction cost, the three assumptions and threedimensions for trading. On the basis of previous studies, the thesis, comparing thejoint venture with enterprises and the market, draws a conclusion that the innatecharacter of the joint venture is a governance structure which can effectively allocateresources between the functions of enterprises and market. The matching relationshipbetween transaction and governance structure is a fundamental issue of the transactioncost, and the joint venture mainly corresponds to the mixed governance structure.Secondly, the thesis analyzes the frequency of transactions, opportunism andcredible commitment’s effect on transaction. With the increase in the number oftransaction, both parties will be more willing to cooperate. In credible commitment,they will not take opportunism in fear of being punished by taking a hoggish strategy.In the joint venture, investment assets with specificity can be seen as crediblecommitment. The motivation of opportunism is to obtain cooperative surplus andappropriable quasi rents.Thirdly, the thesis analyzes joint venture’s forms of transaction cost on the basisof its characteristics. The thesis sees the joint venture as a partnering relation itself,studying its effect on the transaction cost from the perspective of main factors andcharacteristics of the joint venture.Lastly, the thesis conducts a case study of a project the author has participated in.the parties in the joint venture cooperate and trust in each other, successfullycompleting the project.