Arms-length Transactions Research Articles

The impact of sale and leaseback on commercial real estate prices and initial yields in the UK

ABSTRACTThis research evaluates the impact of Sale and Leaseback (SLB) on UK commercial property prices and yields, compared with arms-length transactions. Data on 357 SLB deals and 1266 non-SLB deals are extracted from CoStar and EGI. Hedonic regressions and comparative analysis with the risk-free rate are undertaken. In addition to the SLB dummy variable, explanatory variables include building size, quality, age, sector, location and year of transaction. SLB transactions are found to occur at a statistically significant price premium, with the greatest premium occurring in the office sector. SLB properties achieve a 4.5 percentage point premium compared with the risk-free rate. The net initial yield of the SLB transaction sample is around 2 percentage points lower than for the non-SLB sample in every sector. Reasons for these differences are probed by considering the effect of WAULT and tenant covenant strength. From a vendor’s perspective, the results give an indication of the price premium they might be able to negotiate for their property compared with market prices. This will help them assess whether SLB is worthwhile compared with other available financing options. The findings of a yield reduction should help investors decide whether to engage in SLB investment.

Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 5 Complementarity

The purpose of this chapter is to relate the theory of task networks and technology set forth in previous chapters to theories of firm boundaries from economics and management. Complementary goods have more value when used together than separately. Complementarity may be strong or weak. Strong complements are specific and unique goods that have no value (or greatly diminished value) unless all are present in use. In the task network, dense technical interdependencies create strong complementarity, but it can arise for other reasons as well. Transaction cost economics and property rights theory advise that strong complements should be placed under unified governance, for example, through common ownership. Agency theory suggests that weak complementarity can be handled via arms-length transactions and contracts. Furthermore, strong or weak complementarity are not innate properties of tasks and assets, but can be the result of choices regarding task networks, incentives and job design. Supermodular complementarity exists when more of one input makes more of another input more valuable. Distributed supermodular complementarity (DSMC) exists when two or more independent actors can create complementary value by pursuing their own interests, and will not find it advantageous to combine in order to coordinate their actions. I derive formal conditions under which DSMC holds as a consistent pattern in a dynamic equilibrium. Given DSMC, clusters of firms making different complementary goods, including open platforms with surrounding ecosystems, can survive and compete effectively against integrated firms that control all complementary inputs.

Estimating the Marginal Implicit Price of the Spatially Diverse Environmental Amenities from Urban Open Space in Onondaga County, New York: A Geographically Weighted Regression Approach

This research applies Geographically Weighted Regression (GWR) to investigate how different types of urban open space and their spatial configurations are valued by residential property owners. To reflect residential property owners’ perception of neighborhood and spatially heterogeneous configuration of urban open spaces, environmental amenity variables are measured at 100m and 1km radius buffer surrounding each residential property. GWR and Ordinary Least Squares (OLS) models are applied to analyze 4469 arms-length residential property transactions from Onondaga County, NY (USA) between Jan. 2000 and Dec. 2000 and are evaluated in terms of model fitting and spatial effects assessment. Results of this research show that GWR models outperform OLS models in model fitting and detecting spatial effects in model residuals, as well as is able to find spatial non-stationary relationships in larger number of environmental amenity variables. This research innovates in several ways. First, it innovates by considering spatial configuration of open spaces reflecting residential property owners’ perspective. Second, this research illustrated spatially varying effect of urban open space variables using the marginal implicit price of each variable.

Is guanxi universal in China? Some evidence of a paradoxical shift

The article reports on a study to examine the application of guanxi attributes and the pathways linking them to success and performance in the context of business-to-business relationships in the Chinese diamond industry. We draw on and adapt the Ganqing, Renqing and Xinren (GRX) scale to reveal a paradox in terms of how business is conventionally conducted. This is interesting because in Western markets that are typically governed by arms-length transactions the diamond industry is somewhat unique, as it is built on very close socially driven relationships. The paradox also occurs in the Chinese context, as the opposite is prevalent i.e., in a nation that often relies on social guanxi ties to drive business, the diamond industry is heavily characterized by a somewhat antagonistic arms-length approach. The study pieces together and tests a concept drawing on a sample of 212 diamond merchant traders operating in China. We discover that interpersonal trust (Xinren) has a positive influence on both emotional attachment (Ganqing) and obligational favor (Renqing), but has a direct negative influence on Performance (the paradox). Ganqing serves to positively influence Performance and Renqing leads to greater Satisfaction - which in turn has a positive bearing on Performance. Several implications are extracted from the study that provide useful insights into the ways that guanxi is perhaps becoming more or less prevalent in China.

Fighting Over a Red Herring: The Role of Economics in Recreational-Commercial Allocation Disputes

ABSTRACT This article turns a critical eye on the current role of economics in informing inter-sector allocation disputes. I argue that much of this analysis relies on a notion of efficiency that is flawed on both static and dynamic grounds and fails to address the inefficiencies of existing management institutions. I propose that real-location is rarely a first-order concern. Rather, it is a “red herring” that detracts from far more necessary fundamental reforms within the recreational sector. These reforms would significantly improve the accountability and efficiency of the sector and establish the necessary institutions to resolve allocation disputes in an adaptive, efficient manner through arms-length transactions. I propose a general framework for reform of mixed recreational-commercial fisheries and discuss realistic rights-based policies to better manage fishing mortality for private recreational anglers and facilitate transferability across sectors. I close with an appeal for more policy-relevant ...

A Rock and a Hard Place: Choosing Between § 271(a) and (b) for Divided Infringement in Akamai

In the Federal Circuit’s en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., the court created a new avenue for finding patent infringement liability through inducement of infringement under § 271(b). In doing so, the Federal Circuit partially overruled BMC Resources and held that for the purpose of finding inducement liability, there is no “direction or control” relationship requirement among the induced entities. Akamai represents a substantial change in the law governing divided infringement, and closes a loophole following BMC Resources that left patentees without recourse when entities were able to collectively perform all the steps of a method claim through arms-length transactions. Although the Akamai rule is correct in light of patent policy and legislative history, it nevertheless results in inconsistent statutory interpretation. Instead of opening this new avenue to finding liability, a better approach is to simply loosen the relationship standard required under the doctrine of joint infringement.

Two and a Half Hurdles Between Eurozone Debts and U.S. Courts: How Recent Distressed Foreign Deals Could Soon Be Unwound Domestically

The recent financial unrest in Europe has created significant distressed opportunities for buyers with free capital. In typical arms-length transactions, these buyers would leave with little concern with the viability of their counterparties. But sudden rebounds in values after economic recovery create incentives for counterparties to reclaim once-distressed, but now-valuable, assets through fraudulent transfer litigation. Recent shifts in U.S. jurisprudence may create an opportunity for U.S. bankruptcy courts to unwind these transactions.This article discusses the link between the debt crisis in the Eurozone and a potential flood of future litigation to unwind foreign transactions in U.S. courts. Specifically, this article will address the two and a half hurdles litigants must overcome to reach foreign transactions with U.S. bankruptcy law — namely, Chapter 15 of the U.S. Bankruptcy Code, the presumption against extraterritoriality, and the U.S. Supreme Court’s watershed decision in Stern v. Marshall, 131 S. Ct. 2594 (2011).

WHAT SUPPLIERS SEEK FROM THEIR DOWNSTREAM BUYERS

The results of a study undertaken in the Western Australian apple industry suggest that what growers want from their downstream buyers and what they actually receive as a result of their transactions with their preferred trading partners are vastly different. While most growers want a return that is commensurate with the effort they put in, the prices offered by market intermediaries generally leave the growers dissatisfied. In order to reduce the risk and the uncertainty associated with the exchange, growers will invariably seek to establish long-term relationships with preferred trading partners. However, many customers prefer to maintain arms-length transactions and seem generally unwilling to provide the growers with either market information or technical advice.

Moving up in the global value chain in button manufacturing in China

This study traces the transformation of Qiaotou city from a button distribution centre to a composite and advanced button manufacturing cluster accounting for 65% of world button production in 2006. It argues that button sales originated in entrepreneurial initiative that expanded through market-based armslength transactions as hundreds of stalls mushroomed in Qiaotou. The transformation of Qiaotou from the late 1990s into a composite cluster including designing, new material and product development took place when the local government took advantage of the rapid manufacturing growth to stimulate collaborative links between government, the firms and universities to support the appropriation of research synergies.

Corporate Governance and Law Reform in Japan: From the Lost Decade to the End of History?

Japan is in the midst of massive law reform. Mired in ongoing recession since the early 1990s, Japan has been implementing a new regulatory blueprint to kickstart a sluggish economy through structural change. A key element to this reform process is a rethink of corporate governance and its stakeholder relations. With a patchwork of legislative initiatives in areas as diverse as corporate law, finance, labour relations, consumer protection, public administration and civil justice, this new model is beginning to take shape. But to what extent does this model represent a break from the past? Some commentators are breathlessly predicting the Americanisation of Japanese law. They see the triumph of Western-style capitalism - the End of History, to borrow the words of Francis Fukuyama - with its emphasis on market-based, arms-length transactions. Others are more cautious, advancing the view that there new reforms are merely creative twists on what is a uniquely (although slowly evolving) strand of Japanese capitalism. This paper takes issue with both interpretations. It argues that the new reforms merely follow Japan's long tradition of 'adopting and adapting' foreign models to suit domestic purposes. They are neither the wholesale importation of Anglo-Saxon regulatory principles nor a thin veneer over a 'uniquely unique' form of Confucian cultural capitalism. Rather, they represent a specific and largely political solution (conservative reformism) to a current economic problem (recession). The larger themes of this paper are 'change' and 'continuity'. 'Change' suggests evolution to something identifiable; 'continuity' suggests adhering to an existing state of affairs. Although notionally opposites, 'change' and 'continuity' have something in common - they both suggest some form of predictability and coherence in regulatory reform. Our paper, by contrast, submits that Japanese corporate governance reform or, indeed, law reform more generally in Japan, is context-specific, multi-layered (with different dimensions not necessarily pulling all in the same direction ­ for example, in relations with key outside suppliers), and therefore more random or 'chaotic'.

A tribute to professor Sanjaya Lall: a world class industrial development researcher

Sanjaya Lall, professor of development economics at the University of Oxford died on 18 June 2005. Sanjaya Lall’s scholarly credentials were recognized arly in his life when he won a gold medal in Patna in 1960, ande St. John’s College Prize for achieving a first class honours degree at Oxford University in 1963. A prolific development researcher and writer, he eventually published 33 books and hundreds f internationally oacclaimed articles. In Sanjaya Lall Oxford University had a truly world class scholar who championed intensely the logic behind why some economies enjoyed higher learning and innovation capabilities than others. To Sanjaya Lall technological capability building was the driver of export competitiveness and growth and hence the path developing economies must take to achieve development. Driven by an epistemological conviction that theory must be defined by evidence, Sanjaya Lall fought an often lonely crusade against the ideologues peddling uncritically, on the one hand, neo-liberalism and, on the other, populism. Unsatisfied with the mainstream economic theory Sanjaya Lall increasingly went to the field to seek empirical ammunition to make sense of the alternative theoretical vision he began to construct to understand the complex problems of development. Sanjaya Lall was less scathing on the partisan populists only because they neither had the power nor the network to influence development policy. Sanjaya Lall’s humility, gentleness and keenness to lead the young selflessly have few peers even among the exceptional scholars. Supremely confident of his abilities and heavily committed to his curious disciples, Sanjaya Lall spent considerable time engaging with promising scholars. His open and inquisitive mind often allowed horizontal dialogues between himself and his students. His brilliance gave him the wit, his artistry gave him the reach, his honesty drove him towards the truth, his selfless haracter gave him the conviction, hisc confidence gave him the generosity, his commitment gave him the industry, his diligence made him meticulous and his kindness won him popularity. Sanjaya Lall had originally made a name in the field of multinationals nd developing economies, articulatinga some of the best explanations of circumstances when linkages will take place and how crowding out can be avoided at host-sites. However, because a number of development pillars interlocked and often influenced the process collectively, Sanjaya Lall began to research and publish on trade and competitiveness, globalization and its economic consequences, industrial policy and industrialization, and innovation and technological capabilities. Although all the above have very much been at the heart of the research many of us have and are still doing, I believe it is in the last area that Sanjaya Lall made most his illuminating contributions to the world of knowledge. Sanjaya Lall found that globalization affected economies differently, benefiting those that enjoyed the technological capabilities (both endowed and created) to compete and draining those that failed to engender them. He was particularly concerned for the Sub-Saharan African economies where increased economic integration into the world economy affected them negatively. Sanjaya Lall pioneered novel methodologies to demonstrate the importance of technological capabilities– through arms-length transactions, and active learning and innovation– for poor economies to ove up them development ladder. Consistent with the theoretical logic expounded by Marshall, Tibor Scitovsky and Rosenstein-Rodan, Sanjaya Lall was among the earliest scholars to dismiss the use of the neoclassical production function to estimate spillovers. He had become increasingly concerned with the neo-liberal siege on development economics, what I have begun to call the “mathematics without economic institution syndrome”. While he recognized the important contributions mathematics was making in economics, he was concerned

Buyer–supplier relationship: perspectives between Hong Kong and the United Kingdom

The relationship between buyers and suppliers has received considerable attention in recent years. Traditionally, buyer–supplier relationships were considered as adversarial, arms-length transactions. However, this relationship is moving towards a more collaborative approach. This change is subject to the belief that suppliers are essential sources to gain competitive advantage in world markets in terms of their expertise, knowledge and their ability to share risks. This paper presents the initial findings from the responses of large companies in Hong Kong about their supplier criteria requirement. The results are also compared with a similar study conducted in the United Kingdom to obtain a clearer picture concerning Eastern and Western approaches to strategic purchasing. This paper illustrates some of the key reasons for the differences between purchasing practices in European and Asian companies. Such information is potentially useful since it can be used as a reference guideline for suppliers when initiating collaborative relationship with customers, who may come from different cultural backgrounds.

Engineering Consultancy: An Assessment of IT-enabled International Delivery of Services

The delivery of engineering consultancy services in global markets has been dominated by a small group of firms located in Europe and the US. Like many other service industries, engineering consultants have depended on the movement of highly qualified people and establishment of local affiliates for rendering their services in overseas markets. However, the diffusion of new information technology (IT) and the use of advanced telecommunications have changed the patterns of production and delivery of engineering design services. This paper examines the role of IT in changing modes of internationalization in the sector, focussing in particular on the potential for IT-enabled delivery that would provide an increased tradability of services. It is argued that new technologies have led to integration of project work and new sources of competitiveness in major firms, but that the emerging capacity to deliver services in arms-length transactions across national borders does not appear to have been significantly exploited. Nevertheless, IT-enabled delivery of engineering consultancy services opens up possibilities for business process reengineering that may provide some firms new competitive advantages in global markets and lead to further integration of design and construction in partnerships or project consortia, or in the strengthening of design-build approaches in project execution.

The Dynamics of Buyers' Perceived Costs During the Relationship Development Process

ABSTRACT Existing management practices indicate that buyers and sellers are engaging in closer relationships based on the total cost of the relationship, rather than traditional arms-length transactions solely based on price. This paper develops a conceptual framework suggesting that buyers' perceptions of a product's cost vary during relationship development. The objective of this paper is to provide suppliers with a model that helps them determine how buyers' perceptions of a product's cost vary while a buyer-seller relationship develops. By knowing what components of cost are of relative importance to buyers during each relationship phase, sellers can better manage their marketing efforts. This paper explains this phenomenon in a business-to-business context.

Valuing properties when comparable sales do not exist and the market is in disequilibrium

Real estate markets are periodically plagued by excess supply, rent concessions and few arms-length transactions. During such periods, valuation requires a discounted cash flow analysis, but how far into the future must cash flows be forecast and what will the forecasted cash flows and value be at the end of the forecast period? The model presented shows that cash flows need to be forecast only until equilibrium is reached at which point value equals (depreciated) replacement cost. The value/replacement-cost ratio for the Sydney office market in 1992 is calculated to illustrate the argument.

95/01598 Reshaping the electric power industry

INTRODUCTION As the twenty-first century approaches and the world enters the information age, it is important to ask how the electric power industry can prepare for this dramatically new era of more efficient, cleaner, and more decentralized technologies. During the past decade and a half, many industries, from telecommunications to natural gas, have been extensively de-regulated and reshaped. Although none of these transitions has gone smoothly, it is clear that the process of deregulation has lowered costs for most customers, and offered a plethora of new technologies and services. Today, the electricity industry is in the early stages of an equally profound transformation, but the stakes are even higher. Electric power is a $180-billion-a-year business in the United States - larger than any of the sectors above - and central to many of our most vexing environmental problems, from acid rain to nuclear waste and global climate change. However, the basic issues facing the industry are similar to those faced during the earlier transitions: how to shift from a monopolistic and heavily-regulated industry to one that is more competitive and flexible. The reshaping of the electricity business promises to be complex and contentious. Already, various classes of electricity customers - large factories and small residential users, for example - are competing fiercely for access to the least expensive power. At the same time, many electric utilities are burdened with some $50 billion worth of stranded assets, nuclear and fossil-fueled plants that are too expensive to compete in an open power market against some of the highly-efficient new generating technologies now being built by independent power producers. Environmental and consumer groups fear that hard-won gains such as utility investments in energy conservation - estimated at $2.8 billion in 1993 - and renewable energy generators that rely on wind and solar power will be sacrificed to the demands of a cut-throat market for low-cost kilowatt-hours of electricity. While these concerns are legitimate, and none can be dismissed lightly, they are hardly a reason for stopping the process of change or stepping back to the electric utility structures of yesteryear. If done well - drawing on the lessons of earlier deregulatory efforts - the restructuring of the power industry could end up being good for everyone - small and large customers, utility shareholders, new technology developers, and even the environment. The key is to make a rapid and clean transition to a truly competitive system in which power generation, transmission, and distribution are separate businesses that deal with each other via open, arms-length transactions. If today's power plants are quickly forced out onto the competitive market, and the uneconomic ones written off and shut down, consumer bills will fall, and a host of environmental problems reduced. Through their continuing regulation of the transmission and distribution wires business, federal and state agencies will still have a mechanism for valuing environmental externalities and favoring demand-side management and renewable energy investments where appropriate. Indeed, under this model, it is likely that, as in the first decade of telecommunications deregulation, the next decade could see an unprecedented surge in new power generation, storage and control technologies, most of them small, modular and efficient, and all of them far less expensive than the power systems we rely on today. ROOTS OF MONOPOLY When Thomas Edison started the world's first electric power company in New York in 1880, it looked like a typical under-financed start-up venture, not much different from hundreds of other small businesses. In a Wall Street warehouse, Edison connected a coal-fired boiler to a steam engine and dynamo, then linked the plant by underground wire to a block of nearby office buildings. …

What's at Stake for the LDCs, Now that the Uruguay Round Talks have been Suspended? (The Distinguishedl Lecture)

Until negotiations collapsed in early December, the Uruguay Round gave promise of being the most significant multilateral trade negotiation since 1947, when the General Agreement on Tariffs and Trade (GA TI) was implemented and tariffs levels of the industrial countries were sharply cut. There are at least three reasons for this conclusion. First, by agreeing at the outset to bring both agriculture and textiles under GATT discipline, the participants created the opportunity for both rich and poor agricultural exporting nations and relatively low-wage, newly industrializing LDCs to benefit significantly from GATT-sponsored trade negotiations. Prior to the Uruguay Round, the benefits to these countries of such negotiations had been limited, since these two sectors were excluded from any significant liberalization. Second, by agreeing to formulate new rules relating to trade in services, trade-related aspects of· intellectual property rights, and trade-related investment issues, members took an important step in modernizing the GATT. As economic globalization has accelerated, there is a growing realization that arms-length merchandise transactions, the traditional concern of the GATT, are only one aspect of the real-side economic relations of current concern to national policy-makers and the economic interests they represent Now international commercial activities also involve merchandise trade among multinational firms and their foreign affiliates, international trade in services among independent agents as well as among affiliated enterprises, foreign direct investment activities, production nf goods and services in foreign affiliates for sale either abroad or at home, international flows of technology, and temporary movements of labour across borders. Although the so-called new issues in the Uruguay Round do not cover all of these matters, they go a considerable way in making the GATT more relevant for dealing with the problems of increasing internationalization.