Increased Transaction Costs Research Articles

Криза прав власності у розподільчому сегменті ринку природного газу України

During the time of independent Ukraine's existence, the authorized state bodies have not developed effective mechanisms for the use of state-owned gas distribution networks by private operators. Despite the state being the de facto owner of these networks, it was unable to receive appropriate compensation for their operation, and no incentives were created for the modernization of the networks. Meanwhile, private operators were motivated to consistently report a decrease in the value of such assets. Another complex issue, in terms of the efficiency and fairness of managing the gas distribution system, is the ownership of networks built with consumer funds and transferred to gas distribution network operators for operation. The lack of clear understanding regarding the ownership of gas transportation networks results in significant wear and tear of the networks and substantial production and technical losses. Gas transmission operators are not interested in making significant investments in the renewal and development of networks, as they do not own them, and there are no other obligations that could incentivize such activities. The state does not receive any income from the use of state property by economic entities. In the context of the Russian-Ukrainian war, the issue of property rights and further investments in the development of gas distribution networks has once again come to the forefront. The need to adapt the energy system to the new challenges of the war necessitates the formation of a decentralized model of the national energy system. In the gas sector, this means that at the local level, local self-government bodies will need to take the initiative in implementing small energy projects to meet the energy supply demands of the local population, such as the construction of various types of gas cogeneration plants. The construction of such projects will require the adaptation and development of the existing gas distribution networks to meet new requirements. The formation of a new decentralized model of the national energy network is impossible without resolving the old problems related to the ownership rights of gas distribution networks and establishing a market-based tariff setting for the operation of these networks. The article analyzes the theoretical prerequisites for the emergence of the property rights crisis in the distribution segment of the natural gas market based on the theory of property rights. Through retrospective analysis, the main flaws in the state energy policy in the management of state-owned gas distribution networks are identified, which led to the current property rights crisis and increased transaction costs among entities in Ukraine’s natural gas market. Based on the obtained results and taking into account foreign experience in the privatization and regulation of the economic activities of gas distribution operators, the author proposes various ways to address the problems of managing property rights for the distribution gas networks.

Economic policy uncertainty and corporate bond liquidity

We find that elevated economic policy uncertainty (EPU) is associated with reductions in corporate bond dealer inventories and worsening liquidity, suggesting bond dealers react to increased inventory risk by reducing their capital commitments and compensating themselves via increased transaction costs. A one standard deviation increase in EPU is associated with a 2.19% widening in bid-ask spreads, 2.36% increase in Amihud illiquidity, and 3.38% reduction in average inventories. This effect is greater for bonds issued by firms with direct exposure to government policy, and less pronounced in small firms, illiquid bonds, and calmer markets, suggesting that EPU affects bond liquidity more when macroeconomic, but not idiosyncratic, factors are the primary determinant of bond risk.

European Commission’s Draft Regulation on SEPs: An IP Finance Assessment

Abstract The European Commission’s proposed Draft Regulation on Standard Essential Patents (SEPs) aims to overhaul the landscape of SEP licensing, addressing transparency deficits and fair, reasonable, and non-discriminatory (FRAND) terms amidst the burgeoning Internet of Things (IoT) market. Emphasizing concerns over hold-up risks, the Draft Regulation introduces mandatory essentiality checks and structured FRAND determinations to mitigate opportunistic behaviours among SEP holders. However, the practical implementation of these measures poses challenges, including the accuracy of essentiality assessments and the potential for increased transaction costs. Moreover, the Draft Regulation fails to consider the financial dimension of technological innovation, namely the potential of SEPs to function as valuable financial assets. By undermining the economic value of SEPs in terms of enforcement and monetisation, there is a risk of watering down their potential to serve as valuable financial collateral and therefore to help innovators access debt financing.

Lost in transaction?: An institutional analysis of households’ transaction costs from demand-side grid management

Better utilization of the electricity grid is urgently called for, and demand-side management (DSM) measures are implemented to influence consumers' electricity consumption to off-peak periods. Little is known about how DSM measures generate private transaction costs for households, being crucial for the effectiveness and fairness of such measures. This article contributes to the energy transition literature by exploring sources of private transaction costs for households from a time-of-use tariff scheme for the grid in Norway. Data from nine group interviews reveal that uncertainty about the transaction (grid capacity), distrust of the transactor (grid provider) and the complexity of the institutional context (uncertainty about the electricity sector) increase transaction costs for households and reduce effectiveness of the tariff. Providing households with information on the reasons and methods for adjusting electricity consumption is essential, including the economic impacts on households of the new tariff. Additionally, households should receive enhanced guidance of technology use and behavior changes. For these two steps to work, trust in energy actors must be strengthened. Lastly, one should pay attention to the potentially undermining effect of such DSM measures on legitimacy of energy policies in general, given the unequal levels of transaction costs depending on households’ capital.

Rentier capitalism, social reproduction, and the limits of liberalism: mapping gendered asset value in Kuwait

ABSTRACT This paper introduces the concept of citizenship rent to help explain the apparently contradictory coexistence of liberalising economic reforms and the entrenchment of patriarchal values. Citizenship rent (CR) is defined as the financial flows that move from the state to the citizen in the form of entitlements, employment, and access to state-subsidised goods, labour and business opportunities. Our innovative proposal substitutes transaction cost economics’ assumption of market selection for a selection by patriarchy to show how gender plays a central role in the reproduction of the asset specificities that increase transaction costs. This illustrates how an extractive, asset-based economy, like Kuwait's, can afford to double down on conservative social values, even at a considerable fiscal price, as long as the transaction costs of getting oil to the international markets are not increased through social disruption or political uncertainty. Rather than examining how women’s social reproductive work subsidises social and political stability, CR reveals women’s role in sustaining assets valuable to the state. This paper demonstrates that a close examination of the social values that inhibit transactions can also reveal patriarchal structures in rentier capital and exhibit a need to further analyse the patriarchal transaction costs that shape and sustain societies.

Manufacturing enterprises digital collaboration empowered by Industrial Internet Platform: A multi-agent stochastic evolutionary game

Digital transformation is a critical way to improve the resilience of the manufacturing industry chain. However, the current digitalization of manufacturing enterprises lacks upstream and downstream linkage. If the level of digitization of upstream and downstream enterprises differs significantly, it will increase transaction costs. Digital transformation with the help of industrial Internet platform has become a trend. For this reason, this study deeply explores the influence mechanism of digitalization collaboration of manufacturing enterprises under the empowerment of industrial Internet platform. This paper constructs a stochastic evolutionary game model with core manufacturing enterprise, supplier and local government as the main players. Consider stochastic differential equations to analyze the stability conditions of game subjects, and explore different incentive mechanisms on enterprise strategy. The results show that the data security of the platform and the network effect coefficients significantly affect the strategy selection results of the players. Additionally, the change of environmental noise affects the strategy evolution process of the subject, and the supplier strategy is more affected by environmental noise compared to the core manufacturing enterprises. Furthermore, the dynamic incentive effect of the government is better than the static incentive, which can better promote the digital collaboration of manufacturing enterprises. Dynamic penalties are less effective than static penalties. The study’s conclusions can provide a reference for the government to implement the gradient digitalization incentive policy and provide a theoretical basis for promoting digital collaboration in manufacturing enterprises.

On the issues of business negotiation processes and prospects for overcoming them through large language models

This article investigates the potential of large language models in overcoming problems within the business negotiation process. Typical issues encountered in business negotiations at various communication stages, which highlight the necessity for systematic resolution (such as breaches of good faith principles, ineffective communication strategies, lack of clear planning, etc.), are identified. The study focuses on a key negotiation problem related to the increasing transaction costs of businesses due to unmet interaction results. It demonstrates how large language models can optimize the negotiation process at every stage: from preparation (gathering and analysing information, scenario modelling) to conducting negotiations (contextual analysis, proposal formulation) and implementing agreements (execution control, monitoring). The study highlights that large language models can ensure: objectivity and speed in information processing; improved planning and forecasting; enhanced communication efficiency; and reduced transaction costs. The findings of the research conclude that the application of large language models is a promising development direction for optimizing the business negotiation process, contributing to the reduction of transaction costs and strengthening companies’ competitiveness by expanding human capabilities in managing business communications.

Economic policy uncertainty and enterprise export resilience in China: Does the digital economy matter?

In the new era of international trade, escalating uncertainty and the swift development of the digital economy stand out as two pivotal transformations. These phenomena individually exert significant influences on enterprises' exports; however, their combined effects on export resilience remain underexplored. Hence, drawing on existing theories, this paper analyzes the weakening effect of economic policy uncertainty on export resilience and explores the influence of regional digital economic development on this attenuation effect. Furthermore, empirical tests are conducted using micro-level data from China. The study findings reveal: (1) Economic policy uncertainty weakens firms' export resilience by increasing transaction costs; (2) Digital economic development mitigates this weakening effect by reducing transaction costs, with a more pronounced effect observed among highly efficient firms. The findings suggest that amid escalating uncertainty, vigorously promoting digital economic development holds profound policy significance for the high-quality development of international trade.

Impact of sanitary and phytosanitary measures on agri-products quality upgrading and environmental protection.

Protecting human, animal, and plant life or health from additives, toxins, and contaminants in agri-products and promoting green free trade are the main components of Sanitary and Phytosanitary (SPS) measures. However, the SPS measures are heterogeneous. This study examines the impact of SPS measures on the measured export quality and discusses their influence on the environmental protection of the exporting country. International heterogeneous measures do not necessarily promote quality upgrading but greatly increase transaction costs. By contrast, China's agri-product' quality upgrading and environmental pollution are in sharp contrast. Based on a heterogeneous firm-trade model, this study obtains three hypothetical propositions and conducts empirical regressions using the Tobit method. This study finds that heterogeneous SPS measures hinder quality upgrading because firms present a different quality upgrading trend, which in turn impedes the environmental protection of the exporting country; the quality upgrading made by diversified SOEs is higher than that of foreign firms and private firms; the quality upgrading made by general firms is higher than that of processing firms; and protective SPS measures have a stronger negative effect on quality upgrading and environmental protection.

Trust funds and the sub-national effectiveness of development aid: Evidence from the World Bank

Existing studies imply that multilateral development assistance is more effective than bilateral assistance. However, multilateral assistance is increasingly constrained through earmarked funding where donors restrict the use of their funds. Such funding shifts decision-making power away from multilateral donors and increases transaction costs through more stringent monitoring requirements. We argue that the consequences of these constraints are negative for aid effectiveness. We test this argument by studying the effectiveness of the World Bank in increasing economic growth. Our research design combines novel data on the funding composition of growth-focused development projects between 1995 and 2014 with georeferenced data on their sub-national locations within 50x50km grid cells. Using difference-in-differences estimation, we assess whether local economic development, measured through the Gross Cell Product, increases in areas where core- and trust-funded projects were located in the previous year. We find that while growth-focused projects are generally effective, core-funded projects have a substantially greater impact than trust-funded projects. These findings imply that donors should consider allocating a greater share of their multilateral development assistance as unearmarked contributions if they want to safeguard the development impact of this assistance.

Configuration analysis of asymmetric trust between infrastructure PPP project participants

PurposeTrust is the glue that holds cooperative relationships together and often exists in an asymmetric manner. The purpose of this study is to explore how to mitigate the issue of losses or increased transaction costs caused by opportunistic behavior in a soft environment where trust asymmetry is quite common and difficult to avoid.Design/methodology/approachThis study focuses on examining asymmetric trust between the government and the private sector in public-private partnership (PPP) projects. Drawing upon both project realities and relevant literature, the primary conditional variables influencing asymmetric trust are identified. These variables encompass power perception asymmetry, information asymmetry, interaction behavior, risk perception differences and government-side control. Subsequently, through the use of a survey questionnaire, binary-matched data from both the government and the private sector are collected. The study employs fuzzy-set qualitative comparative analysis (fsQCA) to conduct a configurational analysis, aiming to investigate the causal pathways that trigger asymmetric trust.FindingsNo single conditional variable is a necessary condition for the emergence of trust asymmetry. The pathways leading to a high degree of trust asymmetry can be categorized into two types: those dominated by power perception and those involving a combination of multiple factors. Differences in power perception play a crucial role in the occurrence of high trust asymmetry, yet the influence of other conditional variables in triggering trust asymmetry should not be overlooked.Originality/valueThe findings can contribute to advancing the study of trust relationships in the field of Chinese PPP projects. Furthermore, they hold practical value in facilitating the enhancement of trust relationships between the government and the private sector.

«Безграничные объекты» экономической теории и эволюция представлений о пространстве

The paper considers the question of the evolution of the conception of economic space within the approaches of the classical school of the location of productive forces, the gravity model of international trade, the walrasian equilibrium model, as well as institutional analysis. Physicalist metaphors are considered in parallel with this evolution. It is emphasized that economic objects lack clear-cut boundaries, which leads to the problem of ignoring the heterogeneity of space. It is demonstrated that competition within the Walrasian space reduces the degree of heterogeneity, whereas the Coasian space is inherently heterogeneous. The changes in institutional regimes, blurring of property rights and specifying their identification can both decrease and increase transaction costs. it is inferred that the concept of boundaries of objects is of great importance to economic research.

EXAMINING THE IMPACT OF FINANCIAL CAPITAL ACCESS ON TECHNICAL EFFICIENCY: EMPIRICAL INSIGHTS FROM CARROT FARMERS IN INDONESIA

Objective: This study investigates the interplay between financial capital access and technical efficiency in small-scale carrot farming in Indonesia, focusing on the regions of Malang and Probolinggo in East Java. Methods: Employing a multistage random sampling method, data was collected from 100 farmers, and stochastic frontier analysis (SFA) was employed to measure technical efficiency. Results: The results highlight the positive and significant impact of financial capital access on farmers' technical efficiency. Farmers with enhanced access to financial resources, including credit and loans, demonstrated higher levels of technical efficiency. Additionally, the study identifies the positive influence of larger cultivated land on technical efficiency, allowing farmers greater flexibility and opportunities for adopting modern agricultural technologies. Conversely, greater distances to cultivation lands were found to negatively impact technical efficiency due to increased transaction costs and difficulties in accessing information and markets. Implication: These findings underscore the critical role of financial capital in shaping the success of small-scale carrot farming, emphasizing its implications for sustainable agricultural practices. The study's insights contribute to the formulation of targeted policies and interventions aimed at improving financial inclusion and reducing geographical barriers to enhance overall agricultural productivity and sustainability in small-scale farming communities.

The transaction cost implications from business angel ownership in the Caribbean

AbstractResearch question/issueThis is a study of the relationship between business angel retained ownership in investee firms across the Caribbean region and their informational asymmetry costs captured in bid‐ask spreads.Research findings/insightsWe find business angel ownership to be associated with a reduction in transaction costs or bid‐ask spreads. However, this is reversed leading to increasing transaction costs following moderation by whether the investee firm has a subsidiary located within an offshore jurisdiction and separately if the investee firm adopts higher levels of Anglo‐American shareholder value corporate governance.Theoretical/academic implicationsWe undertake a novel application of incomplete contracting theory in theorizing the influence of ownership of business angels on the transaction costs of their investee firms. We extend and contribute to theory development through consideration of the presence of investee firm's subsidiary located in offshore financial centers within the firm's corporate network and the degree to which it adopts Anglo‐American shareholder value corporate governance. In the former, we argue business angels are more prone to collaborate with firm insiders to the detriment of outside minority investors given the enhanced opacity and shift in incentives. In the latter, we argue the incongruity between business angels, insiders, and outside minority expectations regarding the adoption of shareholder value governance also leads to elevated transaction costs.Practitioner/policy implicationsBusiness angel finance is widely lauded as a potential source of development capital within regional and developing economies with the potential to rejuvenate otherwise moribund entrepreneurial ecosystems and business sectors. Our study yields important findings relevant for practitioners in formulating development policy nurturing the development of indigenous economies through enhanced business angel participation. It also considers the moderating influence of firm's adoption of Anglo‐American shareholder value corporate governance and whether the firm has a related party located in an offshore financial center, something of profound importance in regions comprising offshore financial centers.

What factors affect the emergence of patent thickets: the evidence from China

ABSTRACT A patent thicket is an overlapping web of patent rights that makes the firms willing to commercialise new technologies have to obtain licenses from multiple holders. Patent thickets will increase transaction costs due to complements and hold-up problems, consequently impeding technological innovation. However, what factors may affect the formation of the patent thickets is still an open question. This paper explores the causal factors of patent thickets based on 69 telecommunication equipment firms in China between 2008 and 2019. By adopting the random-effects panel Tobit model, the paper finds that at least three factors facilitate the formation of patent thickets: patent portfolio races, technological complexity, and technological cumulativeness. Notably, the open patent strategy and invention strategy negatively moderate technological cumulativeness and patent thickets. The paper empirically studies what factors affect the formation of patent thickets and theoretically explains the patent thickets’ formation mechanisms at the firm level. Companies’ managers should look objectively at the patent thickets in a complex technical field and may carry out the open patent strategy and invention strategy to navigate patent thickets.

Infringements of European Union law at the local and regional level across Member States

AbstractThis paper investigates variations in infringements of EU rules by substate authorities. The paper tests the effect of structure and actor level variables. First, we test structural factors in terms of the autonomy that substate authorities hold. Second, we test some actor level factors that may also increase transaction costs: autonomy of substate actors, public opinion on the EU and administrative capacity. The results indicate that there is a relationship between the increased autonomy of substate authorities and higher number of infringements. The results also provide support that preference to exercise this autonomy correlates with higher infringements. In addition, the results show that negative public opinion on the EU is strongly correlated to higher numbers of infringements. This suggests that transaction costs associated with multilevel policy implementation and attitudes to the EU are determinants of substate infringements.

Forestry offsets under China’s certificated emission reduction (CCER) for carbon neutrality: regulatory gaps and the ways forward

PurposeAs a typical nature-based solution to climate change, forestry carbon sinks are vital to achieving carbon neutrality in China. However, regulations in China are insufficient to promote the development of carbon offset projects in forestry. This study aims to identify the regulatory obstacles impeding the development of forestry offsets under China’s certified emission reduction (CCER) and explore ways to improve the regulatory system.Design/methodology/approachThis study conducts a qualitative analysis using a normative legal research method. This study conducted a synthetic review of national and local regulatory documents to gain insights into the regulatory landscape of forestry offsets in China. The main contents and characteristics of these documents are illustrated. Furthermore, related secondary literature was reviewed to gain further insight into forestry offset regulations and to identify significant gaps in China’s CCER regulation.FindingsForestry offset regulations under the CCER are characterized by fragmentation and a relatively lower legally binding force. There is no systematic institutional arrangement for forestry offset development, impeding market expectations and increasing transaction costs. The main challenges in China’s regulation of forestry carbon sinks include entitlement ambiguity, complicated rules for registration and verification, a lack of mechanisms for incentives, risk prevention and biodiversity protection.Originality/valueForestry carbon sinks’ multiple environmental and social values necessitate their effective development and utilization. This study assessed forestry offset regulations in China and proposed corresponding institutional arrangements to improve forestry carbon sink regulations under the CCER.

Impact of Corruption on the Application of International Trade Law in Nigeria

Corruption has long been a persistent challenge in Nigeria, influencing various sectors, including governance, public administration, and trade. This study investigates how corruption undermines the effective implementation of international trade laws and regulations, leading to inefficiencies, trade distortions, and weakened enforcement mechanisms. The research draws on qualitative and quantitative data to analyze the specific ways in which corrupt practices affect customs procedures, trade facilitation, and the overall regulatory framework. It explores how corruption among government officials, law enforcement agencies, and private sector entities compromises trade integrity, increases transaction costs, and deters foreign investment. The paper highlights the broader implications of corruption on Nigeria’s trade relationships and its ability to comply with international trade obligations. Ultimately, the study ended by providing policy recommendations to enhance transparency, strengthen institutional capacity, and promote good governance in order to improve the effective application of international trade law in Nigeria.

Blockchain i upravljanje ljudskim resursima

Previous research has shown that implementing blockchain technology in businesses can lead to more secure and efficient processes in various organizational areas, including human resource management. This review paper examines the use of blockchain in human resources departments from the perspective of transaction cost economics theory, which identifies several fundamental variables that increase transaction costs for firms. These variables include bounded rationality, the pervasive possibility of opportunistic behavior, and uncertainty. The paper explores how blockchain implementation, including blockchain-enabled smart contracts, can mitigate these challenges. The paper also identifies some limitations to using blockchain and smart contracts that may increase transaction costs and thus reduce transaction cost savings.

The influences of boundary spanning capabilities and long–term orientation on opportunism in inter–firm relationships

ABSTRACT Opportunism is a common issue in inter – firm relationships, which increases transaction costs, impairs firm performance and supply chain efficiency, and deteriorates relationship quality. Previous studies have intensively investigated factors influencing opportunism but overfocusing on the organisational level. Recently, supply chain researchers have called for identifying factors influencing opportunism at the individual level to gain a more comprehensive understanding of opportunism. Based on transaction cost theory, resource dependence theory, and boundary spanning theory, this study seeks to advance the emerging research stream on opportunism at the individual level by investigating how buyer agents’ boundary spanning capabilities and firms’ long – term relationship orientation can help manage supplier agents’ opportunism. Using a cross – sectional data set of 406 buyer agents from manufacturing companies collected from February to April 2021 in Japan, we tested a set of hypotheses through regression and conditional process analyses. Our findings suggest that buyer agents’ strategic communication and firms’ long – term relationship orientation are critical factors that reduce supplier agents’ opportunism.