Dissecting transaction costs in neighborhood regeneration decision-making: Case studies in Chongqing, China

Neighborhood regeneration (NR) plays a vital role in promoting sustainable urban development. However, in China, the decision-making process for NR incurs high-level transaction costs (TCs), resulting in process inefficiencies that lead to project delays, terminations, and even severe social conflicts. Existing studies on NR decision-making downplay the significant role of TCs in the process, thus failing to address the problem essentially. Therefore, this study aims to decipher the critical TCs and their underlying causes in the NR decision-making process in China. Chongqing is selected as the case area, and two representative project types, namely government-dominated and market-dominated projects, are explored, respectively. Based on TC theory and the application of in-depth interviews, this study identifies TC types, pinpoints key specific TCs through scale measurement and two-mode social network analysis, and elaborates on their determinants through grounded theory analysis. The results highlight the presence of high-level TCs in NR decision-making, revealing the dilemma of market involvement, the impact of uncertainty on the government, and the role of asset specificity. Additionally, the study provides new insights into resident participation. Finally, policy implications are proposed to reduce TCs, thereby enhancing the efficiency of NR decision-making.