In this paper, I present and discuss a theory of management control based on Transaction Cost Economics. This theory specifies the composition of various archetypal control structures, and links these to their respective habitat. These are: (1) arm's length control; (2) machine control; (3) exploratory control; and (4) boundary control. The gist of the argument is that activities predictably differ in the control problems to which they give rise, whereas control archetypes differ in their problem-solving ability, and that alignments between the two can be explained by delineating the efficiency properties of the match. This approach has some interesting qualities. Its relatively simple theme seems to speak to a wide empirical domain, and can be used to make sense of a large set of different control practices. Furthermore, it offers a practicable way to address control structure effectiveness. Finally, the approach is empirically testable.

management control theory, transaction cost economics
Organizational Behavior; Transaction Costs; Property Rights (jel D23), Business Administration and Business Economics; Marketing; Accounting (jel M), Business Economics (jel M21), Accounting (jel M41), Accounting and Auditing: Other (jel M49)
Erasmus Research Institute of Management
ERIM Report Series Research in Management
Copyright 2002, R.F. Spekle, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.
Erasmus Research Institute of Management

Speklé, R.F. (2002). Towards a Transaction Cost Theory of Management Control (No. ERS-2002-06-F&A). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from