Transaction cost theory and resource-based theory to explore the Essay

Transaction cost theory and resource-based theory to explore the argument that big business has lost some of its competitive advantage in recent years - Essay Example In the context of globalisation, the ability of firms to compete their rivals has been related to their size; indeed, large firms have been often considered as having a competitive advantage towards the small and medium enterprises.Transaction cost theory and resource-based theory to explore the argument that big business has lost some of its competitive advantage in recent years.In practice, the above view seems to be invalid; more specifically, the expansion of large firms geographically is not an indication of these firm’s financial strength or highly competitiveness; on the contrary, these firms are often exposed to high operational costs and to increased risks regarding the management of their resources. The above issue is examined in this paper; the transaction cost theory and the resource-based theory are used for exploring and justifying the potential limitation of the competitive advantage of large firms in recent years. Both these theories indicate that the potential s of big businesses to compete in the global market have been limited; this outcome has many different aspects, which are explained and critically discussed used the transaction cost theory and the resource-based theory, at the level that these theories can be used for the evaluation of competitiveness of big business. The understanding of the potential role of the transaction cost theory and the resource-based theory in the identification and evaluation of the loss of competitive advantage of big business requires the reference... Through the views presented above it is made clear that the involvement of the transaction cost theory in the identification and the evaluation of the loss of competitive advantage of big business can have different aspects: a) as noted above, the transaction cost theory is based on the view that all organizational activities are based on a specific cost; therefore, the lack of funds for covering these costs would lead to the limitation of organizational activities – at the level that they cannot be fully funded by the organization; in this way, the firm involved can lose its competitive advantage towards its rivals, b) the precise estimation of costs in large firms is a challenging task; since the operations of these firms are expanded the estimation of the cost involved can be quite difficult; this problem could be effectively resolved by using the organization’s reports – in which the activities and the resources of the firm are analytically described; c) larg e firms can be differentiated from firms of other sizes in regard to its potentials to promote and support its products/ services; regarding the level of costs also, a large firm is highly differentiated from small/ medium firms; however, under certain cases, the financial status of a small/ medium firm can be quite satisfactory allowing the development of various organizational projects – which in large firm may not be feasible because of the lack of the relevant funds, d) transaction costs in large firms – as also in small/medium firms are not standardized; they may change under the influence of the market pressures; this fact could lead to the following problem: a large firm which has no financial problem might become liable to