Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management

TLDR

Property rights theory shares antecedents with transaction costs and agency theories but remains distinct. The study aims to illustrate fundamental theoretical principles from property rights, transaction costs, and agency theories using the oil field unitization case. The authors analyze the oil field unitization business case to derive these principles. The analysis summarizes the theoretical principles, shows that property rights theory explains persistent inefficiencies, and connects it to resource‑based theory. © 2005 John Wiley & Sons, Ltd.

Abstract

Property rights theory has common antecedents with contractual theories of the firm such as transaction costs and agency theories, and is yet distinct from these theories. We illustrate fundamental theoretical principles derived from these three theories by analyzing the business case of oil field unitization. Theoretical principles and application of theory to oil field unitization are each summarized. From this, it is possible to see how property rights theory is well suited to explain business situations where inefficient economic outcomes persist. Additionally, property rights theory forges new theoretical connections with other branches of organizational economics, in particular, resource-based theory. Copyright © 2005 John Wiley & Sons, Ltd.