The Dictionary of Human Geography

Comp. by: LElumalai Stage : Revises1 ChapterID: 9781405132879_4_T Date:31/3/09
Time:21:40:53 Filepath://ppdys1108/BlackwellCup/00_Blackwell/00_3B2/Gregory-
9781405132879/appln/3B2/revises/9781405132879_4_T.3d

intermediate inputs for their production. They

also require a number of discrete, separate

functions to be performed as part of the overall

production process. Williamson argued that

the extent to which all of these operations are

performed within a single vertically integrated

firm versus the extent to which some or all of

the required inputs are produced by other

firms and then acquired through a market

transaction depends on which mode of

organization most successfully minimizes

transaction costs: ‘whether a set of transac-

tions ought to be executed across markets or

within a firm depends on the relatively effi-

ciency of each mode’ (p. 8). Generally, the

more difficult or expensive the task of coord-

ination or ‘governance’ of the production pro-

cess, Williamson proposed, the greater the

likelihood that production will be vertically

integrated within a single internal hierarchy.

The geographical significance of transaction

costs (other than transportation costs) was first

made clear by Scott (1988c), who demon-

strated both theoretically and empirically that

the spatial clustering of firms often serves to

reduce the cost of transactions between them

(see cluster;industrial district). Under

such conditions, firms will find it cheaper and

easier to acquire the requisite information con-

cerning potential suppliers and buyers nearby.

Moreover, because such firms may be managed

by individuals who have come into contact with

one another repeatedly over extended periods

of time, they may have built up a high degree

of familiarity andtrustbetween them that

serves to facilitate the sharing of information

and the successful achievement of non-routine

transactions (Harrison, 1992; Nootebloom,

2006) – what Storper (1997b) called ‘untraded

interdependencies’. When such circumstances

prevail, Scott argued, one should expect to find

a much more fully articulated socialdivision

of labour, in which individual firms specialize

in the production of a relatively small number

of goods and/or services and trade actively with

one another. Such arrangements are likely to

be specially useful in industries for which mar-

ket tastes are changing rapidly, and in which

product life cyclesare short. Since input

requirements for such goods will also change

rapidly, spatial concentration will reduce the

transaction costs associated with producers

finding and assessing the performance charac-

teristics of potential new suppliers. Similarly,

when the product is complex or highly custom-

ized, it is advantageous for producers and users

to interact frequently and easily. Possibilities

for achieving this are enhanced when the

producer and user are close to one another,

thereby reducing the cost of such a complex

transaction (Lundvall, 1988).

Hence, as Storper (1997, pp. 34–5) ob-

served, this kind of analysis demonstrates

‘thatgeographyfigures in transaction costs

in general, and hence influences the boundar-

ies of the firm and production system’. He also

concluded that ‘the geography of transaction

costs helps explainagglomerationand spa-

tial divisions of labour’. However, the transac-

tion cost approach has been criticized for its

rather reductionist analysis of industrial or-

ganization – for its ‘exclusive focus on the

transaction rather than the relationship’

(Powell, 1990, p. 323) – and for its tendency

to ignore the influence of the public sector in

shaping the institutions (such as markets) that

mediateexchange(Harrison, 1997). msg

transactional analysis Ineconomic geog-

raphy, a method of determining the number

of firms in an industry and the nature of

exchanges between them. It is based on

the proposition that ‘the economic institutions

ofcapitalism have the main purpose and

effect of economizing ontransaction costs’

(Williamson, 1985, p. 17). Thus it may be

cheaper for a firm to produce acommodity

‘in-house’ through aninternal transaction,in

order to exploit internaleconomies of scope

or to reap internaleconomies of scale,orit

may be cheaper for a firm to acquire the same

commodity through an external transaction

(e.g. subcontracting), the cost of which may

be reduced by the clustering of suppliers

near to the firm (seecluster). This type of

analysis illuminates one of the forces said

to propel theagglomerationof productive

activities. Transactional analysis is also an ap-

proach used in psychology and psychotherapy;

advertised as explicitly post-Freudian, trans-

actional analysis in this second sense places

its focus on interpersonal interactions (cf.

psychoanalytic theory). Approaches of this

kind, so Bondi (1999) argued, suggest various

affinities with some versions ofhumanistic

geography. msg/dg

transculturation The entwining and entan-

gling of different cultural forms and practices

to produce new ones (cf.hybridity). The

term was originally proposed by Cuban eth-

nographer Fernando Ortiz (1881–1969), who

contrasted transculturation to acculturation.

Acculturationinvolves the adjustment of a sub-

ordinate culture to the impositions and exac-

tions of a dominant culture, a process of

Gregory / The Dictionary of Human Geography 9781405132879_4_T Final Proof page 768 31.3.2009 9:40pm Compositor Name: ARaju

TRANSACTIONAL ANALYSIS