Transaction Cost Theory: a Case Study in the Biomass-to-Energy Sector

Purpose of Review: The objective of the present study is, firstly, to identify the types of transaction costs that can be found for a company from the biomass to energy sector. The chosen company has transaction costs in the context of an in-operation company, i.e., a business already in use. A review of the existing relationship between the company and its local biomass suppliers is also explored, being the key factor to evaluate due to its overall importance, as these suppliers ensure the raw material flow to maintain the operation of the production unit. Recent Findings: It was found that it is possible to apply the same analysis and business monitoring methodologies to the biomass-to-energy sector, similar to what is already happening with other sectors of industrial activity. Thus, it was verified after the analysis that it is possible for the company to obtain better productivity yields, especially if the assumptions of the transaction cost theory are optimized. Summary: By acknowledging the beneficial effects on the environment by replacing fossil fuels with wood pellets, this study aims, in the context of a pellet producer, to analyze the transaction costs of the entire process of biomass transformation in pellets, from raw materials to processing. This study analyses the value chain of the company by applying transaction cost theory to determine if there is a viable application and to identify which are the transaction costs in the company. The results of this study agree with others carried out under the same theme, thereby supporting the viability of vertical integration and the sustainability of the pellet production industry. © 2021, The Author(s), under exclusive licence to Springer Nature Switzerland AG part of Springer Nature.