Exploring variables of transaction costs in Brazilian automotive supply chains

Purpose – The purpose of this paper is to shed light on the “automaker‐supplier” relationships that exist in a supply chain of the Brazilian automotive sector, based on assumptions and variables of transaction cost economics (TCE). Design/methodology/approach – The paper explored case studies carried out at an automotive engine manufacturer and six of its suppliers, applying semistructured interviews. Findings – The findings indicate that automakers seek to utilize a form of hybrid relationship with their suppliers, which sometimes resembles competition and at other times cooperation; asset specificity tends to be greater in the first‐tier of the supply chain; and asset specificity seems to be mediated by aspects such as the amount of production destined to the manufacturer, the objective of maximizing return on previous investments, and the configuration of higher value‐added supply operations. Practical implications – The results corroborate that close, long‐lasting, and trustful relationships tend to reduce transaction costs and improve performance, but in some cases, “latent competition” may also lead to reduced costs; managers should not undervalue the self‐reinforcing effects of asset specificity in a context of shared investments; and business strategy should guide every decision made inside supply chains in order to align supply and operations priorities. Originality/value – Considering the deep restructuring process that Brazilian automotive industry has experienced, this paper brings its contribution in using TCE tools to analyze relationships inside an engine‐producing supply chain, dealing with the links between TCE and supply chain management.