USING TRANSACTION COST ECONOMICS AS A TOOL TO ANALYSE BRAZILIAN AUTOMOTIVE SUPPLY CHAINS

The worldwide automotive industry has undergone a p rocess of important changes in the forms of organizing production, in the supplier-ass embler relationships, and in product development activities. In Brazil, such changes have bee n r inforced by the impacts on supply chains resulting from investments made by new assem blers in order to install assembly plants in the country, as well as those made to modernize the already installed ones. In order to better understand such changes in Brazi lian automotive supply chains, the paper here presented uses case studies from two Brazilian engine-assembly companies and three of their suppliers, to analyze the structural and rela tion l aspects taking place into the chains they are inserted into, based on the analysis tools prov ided by the Transaction Cost Economics. The main results of the work make contribution to u nderstanding the pattern of relationships taking place between the companies studied, include d th development of closer and longerterm relations in some cases and arm’s length relat ions in others. Also, some characteristics of the outsourcing process that is happening in the in dustry seem to be justified by the analysis factors embraced by the Transaction Cost Economics approach. INTRODUCTION Supply Chain Management is a concept developed with a holistic focus, managing across the company’s borders. It’s recognized, by its practiti oners, that there are meaningful benefits to be derived from strategically managing a whole netw ork in order to satisfy the end-clients. (Cooper, Lambert & Pagh, 1997), (Tan, 2002), (Lumus , Vokurka & Alber, 1998). Concomitantly to the development of the SCM concept, accor ding to (Salerno et al, 2003), the worldwide automotive industry has undergone a process of changes in the forms of organizing production, in the supplier-assembler relationships, a nd in product development activities. In Brazil, such changes have been reinforced by inv estments made by new assemblers in order to install assembly plants in the country, as well as those made to modernize the already installed ones. Such investments have had major impac ts on the structure of the supply chains and on the assembler-supplier relations. (Alves Fil ho et al, 2000) and (Alves Filho et al, 2001) In the context of this transformation, meaningful i mpacts can also be observed in the engineassembly units, which supply the car-assembly compa nies. According to (Maia & Cerra, 2004) Brazilian phenomena like “1000cc” and bi-fuelled en gines had also brought important changes in the supply chains of the engine assemblers. One school of thought that can provide interesting ools for analyzing inter-company relationship is the Transaction Cost Economics (TCE). Accor ding to this school, the costs of transacting goods between different firms must not be negle cted, and suitable governance structures must be chosen in order to minimize opportunistic b ehavior. Besides TCE, other schools of thought like Network Theory and Resource Dependency Theory adopt an institutional perspective to analyze the supply chains, focusing the pos sibilities of connections, the forms of coordination, and also the institutional environment (T rienekens, 1999). Transaction Cost Economics embraces a set of hypoth esis that are determining factors in transaction costs: asset specificity, complexity and unc ertainness, transaction frequency, bounded