Formal linkage mechanisms should be used when companies:
A) have few possible exchange partners and uncertainty is low.
B) exchange specific assets and uncertainty is high.
C) exchange specific assets and have many possible exchange partners.
D) exchange nonspecific assets and have few exchange partners.

Question

Quizplus · Accepted Answer

Formal linkage mechanisms, such as contracts or joint ventures, are most appropriate when companies are exchanging specific assets and there is a high level of uncertainty. This is because specific assets are often specialized and unique, and the parties involved in the exchange need a way to ensure that their assets are being protected and valued appropriately. Additionally, high uncertainty means that there is a greater risk of opportunistic behavior by one or both parties, making formal mechanisms necessary to mitigate this risk.

Formal Linkage Mechanisms Should Be Used When Companies