Subcontracting practices in USA homebuilding—an empirical verification of Eccles's findings 20 years later

Abstract

The activities of the construction industry can be interpreted as a network of transactions, or contracts. According to Williamson's framework, the analysis of transaction costs explains why the exchange of goods and services is governed by a specific government structure, ranging from “hierarchy” to “market”. The study is based on two recent field studies of homebuilders and commercial (non-residential) contractors, which follow the analytical methodology of Eccles's investigation of homebuilders’ subcontracting practice. In this investigation, Eccles argued for the theoretical existence of the “quasifirm”, a stable organizational unit between the homebuilder and specialty subcontractors. Before illustrating the authors’ findings, the paper first presents a review of Eccles's study of homebuilders, including a verification of its results. The paper concludes with a discussion of the limitations of the presented studies.