Beyond Transaction Costs: Thorstein Veblen's Contributions to the Analysis of Hybrid Forms of Governance in Agribusiness

The paper aims to investigate Thorstein Veblen (1898) institutional theoretical approach to the analysis of hybrid forms in agribusiness. A comparative assessment of Transaction Cost Economics against to Veblen’s evolutionary approach, originated from the “Old” Institutionalism, was performed. First it was found that a distinctive characteristic of Veblen’s theory is based on the notion of a broad understanding of institutions that considers habits of thought as the core of institutional fabrics. In that regard organizations are also institutions because they induce the evolvement of habits collectively. Second it is stressed out in Veblen’s theory the endogenous relationship among individuals and institutions, called by Hodgson (2007) as “reconstitutive downward causation.” That is distinctive from New Institutional Economics that follows an approach based on methodological individualism in which institutions are the result of individual choices. In Veblen’s theory institutions are as much the result of individual choices as act over choices through the enforcement of habits of thought. So there is a recursive relationship between individuals and institutions. Veblen’s stressed out contributions: (i) a broad concept of institution, and (ii) institutional recursive relationships, both are of great value to the investigation of agribusiness systems. The article provides an assessment of three Brazilian beef alliances which have distinctive governance arrangements, based on horizontal and hierarchical structures. The analysis performed indicates that transaction costs play a minor role on the definition of the governance arrangements. Horizontal governance depends upon relational density to deliver coordination, on the other hand, vertical governance relies on the hierarchical leadership of a “captain” that guarantees cooperative behavior based on economic incentives and vertical control. The empirical illustration provided indications that the patterns of habits of thought and relational density are of key importance to the governance of hybrid forms in agribusiness.