Reassessing the Economic Allegiance Theory from a Transaction Cost Perspective: What’s the Benefit Principle Got to Do with It?

The aim of this study is to address empirically the degree of contractual completeness in franchising by combining transaction cost and relational governance perspectives. First, the ratio of specific and residual decision rights is developed as a measure of contractual completeness. Second, we extend the transaction cost perspective of contractual completeness in franchising by arguing that the franchisor’s and franchisees’ investments have a negative effect on contractual completeness under bilateral dependence and a positive effect under unilateral dependence. Third, we complement the transaction cost perspective by developing new hypotheses regarding the impact of general and knowledge-based trust on contractual completeness. General trust of the franchisor reduces the franchisor’s perception of relational risk and hence the necessity to control the network relationship by more complete contract planning, and knowledge-based trust increases information sharing between the partners and hence the knowledge base for specifying more detailed contracts. The data from the German franchise sector provide some support of the hypotheses.

Transaction costs and technological development: the case of the Danish fruit and vegetable industry

Supply chain finance (SCF) is a collaborative financing approach that strives to reduce the transaction cost and strengthen inter-firm connections, maximizing the mutual benefits. Many studies have discussed the influencing factor of SCF adoption from the unilateral party. However, little attempt has tried to understand it from the nature of SCF. Based on the social capital theory and transaction cost economics, we develop a dual-theory framework to explain SCF adoption. Large-scale survey data from 430 companies in mainland China revealed that from a social capital perspective, structural capital and cognitive capital are two precursors of relational capital in the unique context of SCF, whereas relational capital is a factor that directly affects the focal company to adopt SCF. From a transaction cost perspective, uncertainty, frequency and asset specificity are associated with SCF adoption, respectively. We make theoretical contributions to SCF literature by revealing the roles of different efficient and social factors influencing SCF adoption. Our findings also help companies re-examine their decision to adopt SCF.

Although sharing is not a new subject, sharing behavior enabled by peer-to-peer software technologies is a recent phenomenon. Studies have explored the impact of the sharing economy on consumers by applying the theory of planned behavior, complexity theory, and social exchange theory, but few studies have explored transaction costs in the sharing economy. By integrating network externalities with transaction cost theory, this study explores transaction costs and their determinants in the context of the sharing economy. Structural equation modeling analysis was conducted on data from 375 users of Airbnb. The findings indicate that personalization of asset specificity and transaction frequency negatively influence transaction costs. Additionally, learning of asset specificity and transaction uncertainty positively affects transaction costs, which in turn influence behavioral intention. Furthermore, perceived complementarity has a direct effect on transaction uncertainty. Finally, the number of users moderates the relationship between transaction costs and behavioral intention. This understanding will assist managers in numerous industries impacted by the rapid development of the sharing economy by providing them with strategies for coping with this trend.

Utilizing a model drawn from both transaction cost economics and social exchange theory, we analyze determinants of strategic flexibility in a sample of strategic alliances involved in joint development agreements or joint research pacts. Findings indicate that, in general, determinants suggested by transaction cost economics provided flexibility in modification and inflexibility in exit. From social exchange theory, trust was found to be positively related to both types of flexibility while another component of social exchange theory, dependence, was found to be negatively related to the strategic flexibility of the alliance. Results also found that factors suggested by both transaction cost economic theory and social exchange theory were related to the concept of trust. Economic constraints as suggested by transaction cost economics were positively related to trust between the alliance partners while dependence was negatively related to trust. Additionally, the quality of communication and the existence of shared values were positively related to trust between the exchange partners. Results provide support for the role of determinants from both transaction cost economics and social exchange theory in the flexibility of strategic alliances.

May 1999 - Which factors prevent the rural poor and other socially excluded groups from having access to land in Orissa, India? The authors report on the first empirical study of its kind to examine - from the perspective of transaction costs - factors that constrain access to land for the rural poor and other socially excluded groups in India. They find that: -Land reform has reduced large landholdings since the 1950s. Medium size farms have gained most. Formidable obstacles still prevent the poor from gaining access to land. -The complexity of land revenue administration in Orissa is partly the legacy of distinctly different systems, which produced more or less complete and accurate land records. These not-so-distant historical records can be important in resolving contemporary land disputes. -Orissa tried legally to abolish land-leasing. Concealed tenancy persisted, with tenants having little protection under the law.

Homesteading and Property Rights; Or, "How the West Was Really Won"

Purpose – The purpose of this paper is to contribute to the existing knowledge about joint ventures (JV) by modeling the interactional strength of fit between JV partners. The paper integrates different constructs from three theoretical perspectives most widely used in JV studies – trust and commitment from the relational perspective; opportunism and specific investments from the transaction cost perspective; and assesses the moderating role of fit from the contingency perspective. Design/methodology/approach – Quantitative data from JVs were collected using the survey method. Relationships in the moderated mediation model were tested using complex sets of hierarchical regression steps. Findings – Relational intentions of partners influence specific investments between the partners. The two together drive JV performance and their impact is moderated by the extent of fit between the partners. Thus, it is concluded that the strength of fit, as perceived by partners, influences the role of other constructs from the relational, transactional and contingency perspectives, which together can help us understand performance of JVs better. Research limitations/implications – An assessment of longitudinal view of the relational variables and subsequent performance can be captured in future. This research assesses fit based on compatibility, which assesses similarity as well as complementarity, primarily by way of harmony in different aspects. Future research could differentiate complementarity from similarity to further assess the impact of fit. Practical implications – The relational behavior of JV partners, or their rational approaches to resource seeking, will be optimally effective only when the fit between partner characteristics is high. While the relational or transactional approaches can evolve in JVs, the partners should assess the extent of fit before getting into a JV relationship. Originality/value – The research presents a holistic framework that draws from various theoretical perspectives. The results establish that contrary to its peripheral treatment in the literature, fit plays an important role and can modify the influence relational variables and specific investments can have on the performance of JVs.

Academy of Management JournalVol. 56, No. 4 From the EditorsIntegrating Theories in AMJ ArticlesKyle J. Mayer and Raymond T. SparroweKyle J. MayerUniversity of Southern CaliforniaWashington University and Raymond T. SparroweUniversity of Southern CaliforniaWashington UniversityPublished Online:26 Jul 2013https://doi.org/10.5465/amj.2013.4004AboutSectionsView articleView Full TextPDF/EPUB ToolsDownload CitationsAdd to favoritesTrack Citations ShareShare onFacebookTwitterLinkedInRedditEmail View articleREFERENCES Argyres N. S. , Zenger T. R. 2012. Capabilities, transaction costs, and firm boundaries. Organization Science, 23: 1643–1657. Google Scholar Blau P. 1964. Exchange and power in social life. New York: Wiley. Google Scholar Brass D. J. 1984. Being in the right place: A structural analysis of individual influence in an organization. Administrative Science Quarterly, 29: 518–539. Google Scholar Bunderson J. S. 2003. 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This paper analyses voluntary traceability effects on the coordination of the food supply chain from the transaction cost perspective. The analysis concerns Italian firms and makes particular reference to the meat sector. A survey was conducted by questionnaire to assess the changes in key transaction factors and costs after the introduction of traceability. The results underline an increase in the degree of human, material and site asset specificity, and reveal a reduction in the degree of uncertainty in transactions. Growth in some transaction costs related to monitoring is also observed. Factorial and cluster analysis were used to underline the different organisational solutions of the firms.

Private standards are among the main measures that can be implemented to differentiate food production. Retailers have been particularly active in setting food safety and quality systems for the development of their private labels. The purpose of this paper is to identify the effects of introducing measures that guarantee the environmental sustainability of food production on vertical dyadic relations. We focus our attention on the adoption of integrated pest management (IPM) systems that are designed by retailers to support private label products, with the aim of studying how these systems affect the governance structure of transactions between retailer and farmer/processor. Transaction cost analysis is used as theoretical framework to assess changes in vertical coordination after the adoption of an IPM system. Four case studies related to food retailers in Italy were analyzed to identify changes in transaction characteristics, costs, and governance that are related to the adoption of this system. The results show that the introduction of an IPM system leads to an increase of transaction asset specificity (i.e., especially of human and material asset specificity) among the agents of the supply chain, and a decrease of the degree of transaction uncertainty. The variations in transaction characteristics determine changes in transaction costs. These changes lead to new hybrid forms of transaction governance, namely dyadic contracts, and a centralized organization of vertical relationships.

In many parts of the world, rural development is supported by third sector organizations, such as nongovernmental organizations, farmer associations, and cooperatives. This essay develops a transaction cost explanation of these organizations’ role in rural areas. Since the traditional transaction cost theory is concerned with the choice of governance mechanisms within the for-profit sector, this essay adopts an alternative conceptualization of the notion of transaction cost by building on the theory of the division of labor. This theory regards transaction cost as a constraint on the division of labor causing the replacement of exchange with self-sufficiency. The proposed transaction cost explanation of rural third sector organizations consists of two arguments: 1) third sector organizations embody partial reliance on self-sufficiency; and 2) rural areas exhibit rurality-specific transaction cost acting as a constraint on the division of labor and thus creating a niche for third sector organizations. The essay concludes with suggesting a research program on developing an economic theory of the rural third sector.;

PurposeThis study aims to explore the reasons behind the lengthy delays in completing a single public-private partnership (PPP) project in Indonesia and investigates how the transaction costs play a significant role in hindering the project’s success.Design/methodology/approachTo broaden insight into the transaction cost theory, the authors used a single case study approach to provide a more in-depth analysis of a context whose complexity can be fully explored. As the primary data sources, 16 face-to-face semi-structured interviews were conducted with the stakeholders directly involved in the project’s initiation, design and execution.FindingsThis case study demonstrates that transaction cost issues, both political and economic, play a significant role. This study has identified four main problems associated with transaction costs hindering project success, namely, executing agencies’ lack of knowledge and experience, lack of coordination for such a complex governance structure that links too many stakeholders and the financial and political risk that increase the uncertainty and public distrust.Research limitations/implicationsThis study contributes mainly to the PPP and transaction costs economics literature, providing empirical evidence on why major PPP projects may fail to be procured. The Greater Bandung waste to energy (WTE) Project case demonstrates that transaction costs, both political and economic, have played a significant role in the lengthy delay of the PPP project.Practical implicationsAs the project involves many transaction cost issues, mapping the failure factors at the project sites can significantly contribute to the practitioners/stakeholders involved in the PPP WTE projects. Therefore, this study provides a lesson to the policymakers at all levels interested in PPPs to consider the issues of transaction costs related to the PPP projects. It can be used as guidance as well as a reference for future PPP WTE projects in Indonesia.Social implicationsMapping the failure factors also signifying the response of the public in the PPP WTE projects undertaken. As the citizens become more rule-conscious and rights-conscious, they demand the opportunity to participate in creating rules and project plans. If the project failed to consult with affected communities and undermined democratic accountability, the angry citizens will confront the government to cancel the project. Therefore, political and economic influences for public attitude play significant roles in making the PPP WTE projects successful.Originality/valueThis study provides insight into the transaction cost issues that have hindered the completion of Indonesia’s PPP WTE project over the past 15 years. Additionally, the project feasibility analysis should include an understanding of transaction costs for partnering in PPP.

The Qing tributary system, which is centered on China, has been regarded as a universally acknowledged and distinguished regional order in pre-modern East Asian. This system is made up of a series of informal, formal institutions and the system of governance. Such system can get a good explanation by using the transaction cost theory of new institutional economics. It is obvious that the available literature about the tributary system rarely involves transaction cost theory; so this paper tries to analyze the Qing tributary system from this perspective and break the traditional analytical paradigm of international relations scholars, and then tries to build and sum up the two explainable models about the system of rising and recession.

This paper applies transaction cost economics to a recent trend in international corporate income taxation: Advance Pricing Agreements (APAs). An APA is a cooperative arrangement between tax authorities (of at least one jurisdiction) and the multinational corporate taxpayer. It serves to resolve, in a cooperative manner before the business has taken place, the potential transfer pricing disputes between tax authorities and multinationals. This constitutes an alternative to the traditionally adversarial process of taxing. Whereas taxation can be classified as a typical bureaucratic governance form to generate state budget, the collaborative interaction between the corporate entities (taxpayers) and the tax authorities through an APA is explained by mutual information asymmetry. By means of asymmetric information on both sides, the paper shows why APAs play an increasing role in corporate transfer pricing strategies and international taxation. Information-related factors such as compliance expose the involved parties to hazards and uncertainty regarding income allocation and taxation, if the institutional environment does not dismantle asymmetric information. The model also predicts that, if institutional change (e.g. tax system harmonization) results in one-sided asymmetric information in the hands of the taxpayer, bureaucratic governance may revert.