Thursday, February 13, 2020

Transaction Cost Economics and Evolutionary Theories. Compare and Essay

Transaction Cost Economics and Evolutionary Theories. Compare and Contrast. (See Assignment Criteria) - Essay Example Management accounting is concerned in identification and provision of financial and economic information to managers within the organisation to enable them make proper decisions, maintain control over business operations, monitor budgets and profit performance and direct the organisation to success in the future.1 Management accounting is crucial for planning and the process of problem solving such as determining the most cost effective method of production, it is also important in that it involves the development of budgets that help in the forecasting on future production cost and levels of production and profits. Management accounting involves the preparation of budgets that aid in planning, coordination of the activities of various departments, budgets provide a means of communicating the organisations goals and plans, they act as motivation tools and they act as a tool of control where actual and activities are compared with the budget and any deviations are investigated and corrective actions undertaken. Transaction cost economics studies organisations in a way that different institutional arrangements are considered alternative ways of organising economic activities.3Transaction cost economics explains why certain transactions are associated with a certain form of organisation whereas other transactions are associated with other forms of organisation; specific institutional arrangements are chosen to govern specific transactions because they offer distinct sets of control devices which other forms do not offer, therefore institutional forms differ in their ability to solve problems and the form of control they offer.4 Evolutionary theory also referred to as the old institutional economics as Foss (1994) defined it, this theory tends to investigate the possibility of transforming the already existing structures of organisations, therefore the evolutionary theory observes organisation forms as having emerged from the already existing

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