Assessing transaction efficiency for biomass: a case study of the Upper Peninsula of Michigan

In concordance to the renewable portfolio standard program, the state of Michigan promotes generation of renewable electricity through the renewable energy plan. Despite policy efforts, performance figures reveal an industry that has not gained the momentum one would expect. This article focuses on five biomass‐related transactions aiming to diagnose whether input transactions have performed as transaction cost economics (TCE) would predict. Based on qualitative analyses, results show that the coordination mechanism adopted by logging firms and biomass processors have led parties to experience hold‐up problems. The paper concludes with an alternative strategy to alleviate hold‐ups and devise an efficient market for biomass.