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Contractual structure in British Columbia’s silviculture sector : a transaction cost economic analysis

University of British Columbia

This dissertation investigates the effects of institutional reforms in British Columbia's silviculture sector. Based on transaction cost economics, the institutional restructuring in BC's silviculture sector, especially since 1987, is argued to have effected the contractual relationships for silvicultural performances in response to the need to economize on transaction costs. Research emphasis is on forest companies' choice of contractual forms between contracting out and in-house operation. An analytical framework is developed through the presentation of a theory of contractual choices and the identification of a set of transaction cost attributes and firm characteristics. Hypothesis testing is performed by means of probit and ordered probit models, using survey data. Empirical results confirm the general validity of transaction costs theory that firms pick contractual forms in accordance with the attributes of silvicultural activities and firm-specific characteristics. Separate regression analyses have also been conducted to examine the determinants of forest companies' choice of payment schemes such as piece wages and time rates and the determinants of silvicultural contractors' performances. Changes in the structure of silvicultural costs during the period 1987 - 1996 have also been examined through a case study of a major forest company that operates on the BC Coast. The empirical results confirm that contractual forms tend to align with transaction attributes and firm characteristics so that some costs of transacting can be saved. The research findings suggest that neither pure market-based outsourcing nor vertically integrated in-house forms necessarily prevail. Ultimately, the choice of governance modes is dictated by the nature of the transactions involved.

Thesis/Dissertation

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2009-06-02

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http://hdl.handle.net/2429/8601

Forestry

University of British Columbia

UBCV

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