This paper examines the relationship between the economic organization of
the nuclear power industry and its perfornmance in designing and building
nuclear power plants. The institutional relationships that link French, West
German and Japanese utilities with their nuclear plant suppliers are described
and compared. The focus is on three interrelated aspects of these
relationships: (1) the extent of utility involvement in the supply process;
(2) the extent to which the various supply functions are "horizontally"
integrated; and (3) the nature of the contracts linking the utilities and
their suppliers. The transaction cost approach provides the framework for the
analysis. The central idea underlying this approach is that important
efficiency consequences flow from decisions concerning whether to organize
transactions contractually between firms or administratively within them, and
that for any given transaction an optimal governance structure exists which
depends in a predictable way on certain attributes of the transaction.
There are substantial differences in nuclear power plant project
organization among the three countries. The transaction cost approach cannot
explain why these differences have arisen, since they are much less the
outcome of the formal economic optimization process assumed in the theory than
of state-specific factors, including industrial traditions, legal
restrictions, political initiatives and administrative planning.
Nevertheless, the approach provides qualitative insights into the economic
implications of these differences. It also provides insights into why an
organizational approach that is effective in one structural and/or national
cultural context may be more or less effective in another.Mellon Foundation and the M.I.T. Center for Energy Policy Researc
