Recent research has looked at the value of transaction cost economics (TCE; Williamson 1978; 1985) for understanding cost accounting practices in government with mixed results (Mohr 2017a; Van Helden and Hujben 2014). Employing different methods and with somewhat different units of analysis, the studies conclude that TCE might be a “suitable starting point” (Van Helden and Hujben 2014, p. 475) for understanding overhead cost control and cost accounting. However, the study by Mohr is quantitative and lacks description, and the study by Van Helden and Huijben is limited to only overhead services, which may limit its applicability to the theory.
The fundamental idea of TCE is that asset specificity and uncertainty limit the production of certain services without extensive governance arrangements. One of those governance arrangements is the administrative control, or accounting, that can be used to control the service (Tadelis & Williamson 2012, p. 13). However, while accounting is a fundamental part of the administrative control apparatus from the perspective of TCE, it is also subject to manipulation (Williamson 1985, Chapter 6). Therefore, while the studies by Mohr, and Van Helden and Huijben are indeed a good starting point they could benefit by expanding the analysis to all services that a government employs and by being more descriptive in the types of problems encountered with using TCE as a frame for understanding cost accounting in government.
One of the major difficulties with TCE for understanding cost accounting in the public sector is that it is fundamentally intertwined with the employment contract (Mohr 2017b). This is a point that Tadelis & Williamson (2012, p. 9) painfully belabor as a limitation of most empirical research on the subject; however, most research does not even try to untangle human capital based asset specificity from the more technical asset specificity associated with original TCE (for exceptions see Hefetz and Warner 2012) .
This research looks at a case study of a local government cost accounting implementation in the United States to address the question does human capital based asset specificity or technical asset specificity influence the use of cost accounting? It finds that human capital based asset specificity limited the use of cost accounting as suggested by theory, but it does not find support for the assertion that technical asset specificity influenced the use of cost accounting. This suggests that changes may be warranted to the use of transaction cost theory in the public sector and when using it to describe public sector accounting in particular.
Accounting and accountability of value creation in innovative public service delivery arra
IRSPM_2018_small_government_case.pdf 