The Economic Effectiveness of Timber Trade: A Transaction Cost Perspective

In recent years, increasing environmental regulations, wood processing overcapacities, and increased competition between the timber and energy markets for available resources, have been among the challenges which have drawn attention to the timber (round-wood) trade and its institutions. Dramatic changes of institutions in forest products industries in last 20 years pose two sides of one coin. The forestry sector is in a long-term development crisis. Simultaneously the wood processing industry is facing an economic existential crisis. Based on this situation there is a call for more effective timber (round-wood) trade structure, which mainly influences economic goals in both sectors. Therefore, the main objective of the research project VEGA č. 1/1099/12 "The Economic Effectiveness of Timber Trade: A Transaction Cost Perspective" is to obtain a coherent knowledge on timber trade structure through identification of its transactions, transaction costs and benefits. Design of research projects is based on interplay between theory and empirism. Theoretical framework stems from the thoughts of new institutional economics, which states that the solution of coordination problems of economic transactions between two actors requires transaction costs. Concept of relational contracts is utilized in order to explain cooperation between actors in a world of unpredictable events and in order to maintain these transaction cots at minimum. The applied qualitative research approach of the project consists of two phases because of its explorative nature. The first phase of the project is focused on collection of data on detailed knowledge on institutions, transactions, transaction costs from a theoretical and empirical perspective (research methods: literature review, exploratory interviews, content analysis, analysis of documents). The goal of the second phase is to compare results of first phase and to apply them on selected case studies. The objective of the case studies is to identify status-quo trade structure, its alternatives and costs based on cost-effectiveness analysis of selected forest product companies (research methods: problem-centered interviews, content analysis, analysis of cost-effectiveness).