Modelling the Choice of the Organizational Form in the European Bioethanol Industry
Résumé
With increasing interest in renewable energy from agriculture, including bioethanol for environmental benefits, rural growth and development, and energy security, there is a need for a better understanding of the economic organization of this emerging industry. Study of the organization of the bioethanol industry represents an under-researched area and a new application of transaction cost theory to an emerging industry in Europe. Refinement of the theory can also result from challenging applications. This paper provides an application of transaction-cost economics theory to the existing European bioethanol industry in challenging the empirical convention of excluding production cost variables from transaction-cost analysis. Utilizing survey data from 41 bioethanol firms using sugar beets and/or cereals, we study the relationship between transaction's frequency, physical asset specificity, site specificity and scale in explaining firms' decisions to insure procurement of inputs either externally or through contracts. Consistent with transaction cost theory, the resolution of both dichotomous logit and probit models shows that both physical asset specificity and scale are good predictors of organizational forms. Given this evidence, this paper reconsiders the impact of scale and transaction costs on the choice of organizational form.
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