The Research On Vertical Relations Between Enterprises From Transaction Cost Perspective

The labor division and specialization is deepening in Today’s world, which inevitably involves vertical relations. As a kind of institutional framework, an appropriate kind of vertical relations between enterprises plays an important role in organizing the cooperation between the upstream and downstream firms. Through keeping track of vertical relations in the enterprise development, it is easy to found out that vertical relations between enterprises is constantly changing, making the transition to vertical integration、enterprise organization and the network organization of enterprises. Therefore, what is the intrinsic mechanism of vertical merger and vertical disintegration, forming different kind of vertical relations between enterprises?Through the transaction cost theory, we are able to provide selection mechanism on matching vertical relations and trades in order to decrease the transaction cost, which based on the differences between vertical relations. Through the selection mechanism, we offer explanations about the changing of vertical relations under the dynamic environment:the changing of historical circumstances、 industry life cycle and other things inevitably bring on many changes in the characteristics of transaction, which objectively requires enterprises to change vertical relations to govern the transaction and organize the cooperation between the upstream and downstream firms in a better way.