Institutional Economics Perspective Research Articles

Influence of foreign alliances on the performance of small-scale agricultural businesses in South Africa: A new institutional economics perspective

Background: Globalisation has accentuated the need for small-scale agricultural businesses (SSABs) to network horizontally and vertically into world markets. However, the capacity of SSABs to cement foreign alliances to capitalise on business opportunities that the expansion of global markets presents, while simultaneously mitigating against the negative forces of globalisation remains a grey area.Aim: The study sought to contribute to internationalisation literature by examining: (1) the extent to which SSABs’ owner and/or managers in selected South African provinces establish foreign alliances, (2) whether there are any statistically significant differences in SSABs’ performance based on their extent of establishment of foreign alliances.Setting: The setting for this study was Vryburg-Pokwani in the North West and Northern Cape provinces of South Africa, respectively.Method: A survey was conducted on 151 SSAB owner and/or managers in the aforementioned study area.Results: The results revealed that although a majority (51.7%) had some (i.e. few) foreign alliances, 48.3% of SSABs had no foreign alliances at all. The results also demonstrated that the establishment of foreign alliances was positively and statistically significantly related to the performance of SSABs in the Vryburg-Pokwani area. Post-hoc comparisons (Bonferroni) results showed that while SSABs with 1–2 foreign alliances perform better than those with no foreign alliances at all, those SSABs with 6–10 foreign alliances perform better than those with none, 1–2 and 3–5 foreign linkages respectively.Conclusion: Since SSABs with foreign alliances tended to outperform those that were dependent on domestic links, the extent to which the economic benefits derived from internationalisation are reinvested into the businesses for the continued sustenance of businesses needs more rigorous investigation.

Taking institutions seriously: Applying the new institutional economics to Iraq

Abstract Why has a developing country like Iraq shown a fragile economic development, despite the rosy picture that had been drawn about the potential of the Iraqi economy? To answer this question, an attempt has been made to look at the Iraqi development from the new institutional economic (NIE) perspective. This article contains a brief summary of a Ph.D. dissertation on the economic development of contemporary Iraq. In essence it traces the role of institutions, institutional policies and how the rapid and frequent institutional changes have driven the Iraqi economy for decades. Although applying the NIE to Iraq expands the range of choices of institutions that could be examined, the choices have been narrowed down by focusing on three central issues: agriculture, oil and wars. The picture emerging from the dissertation is one of abrupt and instantaneous institutional changes, through which institutions were repeatedly subject to reshuffle and facing changing circumstances. Consequently these changes have markedly affected the path of economic development in Iraq.

Institutional Economics of Agricultural Soil Ecosystem Services

Who owns the soils? What seems to be a straightforward legal issue actually opens up a debate about the ecosystem services that can be derived from soils and the distribution of benefits and responsibilities for sustaining functioning and healthy soils. In particular, agricultural land use may be constrained by a lack of properly defined property rights. Using the new institutional economics perspective, we show that multifunctionality of soils and an attribute-based property rights perspective substantiate the intuition that land property implies special obligations towards the common good. The concept of ecosystem services can illustrate the variety of beneficiaries of multifaceted soil ecosystem services. This allows identification of reasons for unsustainable soil management that result from imperfections in the definition of property rights. We suggest implications for improved governance of agricultural soils using two case studies in the EU context: the EU Common Agricultural Policy and the use of planning instruments to steer agricultural soil use in Germany. Thus, we contribute to achieving the societal goals of more sustainable land use by detecting causes of shortcomings in current land regulation and by suggesting governance approaches to support a more sustainable management of agricultural soils.

Construction safety knowledge sharing by Internet of Things, Web 2.0 and mobile apps: psychological and new institutional economics conceptual analysis

The construction industry has always recorded a high work accident rate on sites. Many of these occur due to an asynchronous knowledge sharing problem. Some construction teams may only work occasionally on sites and may not be able to communicate to new teams at shift changes by the time they leave the sites. High-level subcontracting is another issue. The primary contractors may find it difficult to share safety knowledge down the line of subcontractors to reach the lowest level workers. The recent popularity in Web 2.0, mobile apps and the Internet of Things provides a new perspective on asynchronous safety knowledge sharing. Workers from different teams who never physically meet each other can now share knowledge easily by simple means. A natural starting point when conceptualizing the role of institutions in economic geography is to consider the constraints and incentives that affect economic action. This perspective, to a certain extent, coincides well with psychological theory which studies the factors that affect people’s behavior. In this research paper, we study the construction practitioners’ knowledge sharing behavior from 1) New institutional economic perspectives under the lens of informal institutions and 2) Psychology’s perspectives such as Homan’s proposition.

Towards an effective partnership policy for improving urban low-income housing provisioin in Nigeria: New institutional economics perspective

Recent critique against the past urban housing provision strategies in Nigeria was that the low-income groups are marginalised. It then led to the adoption of public private partnership (PPP) initiative with a view to pursuing the broad goal of housing-for-all in Nigeria. Most recent studies have however criticised the effectiveness of the existing PPP practice in the housing provision structure without providing a pragmatic suggestion towards an effective framework for improvement. It thus raised the question; what are the main causes of ineffectiveness of existing PPP in housing provision and how can an effective PPP policy framework for urban low-income housing be achieved in Nigeria? This study utilised the concepts of new institutional economics (NIE) -a theoretical and methodological underpinning for multi-actors’ policy matters. Using qualitative data from structured interview and credible literature sources, findings indicate that uncertainties in land accessibility, high transaction costs and the developers’ high profit agenda, are the major causes of PPP ineffectiveness for housing provision, which are also attributed to lack of a specific PPP policy that recognises all income groups and their roles on housing provision. End-users suggested that governmentcould have a negotiation with land owners and building materials dealers to address the housing problem. In conclusion, it is established in this study that adoption of all-inclusive conceptual approach described within the context of NIE thought can facilitate an effective planning for urban low-income housing in Nigeria.

From Complexity Reduction to Moral Character: A Deweyian Reading of Luhmann's Social Systems Theory

Taking account of the widest possible range of consequences of one's action takes centre stage in John Dewey's pragmatist ethics, which likewise acknowledges that the ability to do so depends on the individual moral character. In contrast, Luhmann's theory of complexity‐reducing systems underscores the difficulties that social systems experience in registering the consequences of their operations in the overwhelmingly complex environment. Drawing upon Dewey's concept of moral character, the paper argues that social systems can be infused with an interest in controlling those consequences that pose risks to their sustainability. From an institutional economics perspective, this interest is shown to be implicated in the justification of the firm ownership in Alchian and Demsetz's theory of the firm. From the business ethics perspective, a similar interest is shown to underpin corporate social responsibility activities. Both perspectives acknowledge the effect of the corporate moral character on the predictability, reliability, and orderliness of corporate behaviour. © 2017 John Wiley & Sons, Ltd.

The emergence of post-crisis regional financial institutions in Asia—with a little help from Europe

Faced with the negative impact of regional and global financial crises, Asian countries have established joint-solution mechanisms over the last two decades in order to better protect themselves from short-term outflows of capital and from currency speculation. Despite some progress being made in regional financial cooperation, especially by the countries of the ASEAN+3 grouping, the overall degree of financial integration within the region remains surprisingly low, however. This contrasts sharply with the keen interest of many Asian countries in gaining a stronger voice within the multinational finance institutions (MFIs), and especially within the International Monetary Fund (IMF). Unable to initiate major governance reforms of the MFIs, Asian countries have not only set up regional support liquidity arrangements but also their own multilateral development banks (MDBs). While the USA and to some extent Japan have tried to prevent a rebalancing of power within the global financial architecture, major European countries have actively supported these changes by becoming founding members of the China-led Asian Infrastructure Investment Bank (AIIB). Taking a New Institutional Economics (NIE) perspective, the paper aims to explain why some regional financial institutions are more attractive for Asian countries than others and why European countries are supporting Asia’s attempt to gain more weight in global financial governance (GFG)—and, thus, contribute to the acceleration of the power shift away from the USA toward emerging Asian economies in general and China in particular.

Impact of institutions on entrepreneurship: a panel data analysis

The purpose of this paper is to study the relation between institutions and entrepreneurship from the perspective of institutional economics. In the first section, we discuss the importance, role, and interaction of the institutions and entrepreneurs in the economic and social change/development process. In this context, we point out three roles of institutions: the role of facilitating economic/social exchange, the coordination role of economic actors’ decisions, and the role of the allocation of entrepreneurs between various sectors. In the second part, we investigate the impacts of formal institutions and institutions of governance on formal and informal entrepreneurship using an unbalanced panel data set of 54 countries over the 2004–2012 period. Estimation results reveal that while both formal institutions and governance stimulate formal entrepreneurship, the former is negatively associated with informal entrepreneurship. In addition, we find that financial development increases the positive impact of institutions on formal entrepreneurship. These results also shed light on the link between institutions and entrepreneurship, as suggested by Baumol and de Soto.

Exploring the Interface Between Formal and Informal Real Estate Markets in Facilitating Legally Binding Transactions in Zambian Cities

Informality is the order of the day in most cities in the Global South. This paper explored the puzzle whereby informal activities result in legally binding real estate transactions in the city of Kitwe in Zambia. The paper conceptualises the “market” from an institutional economics perspective as a system to coordinate human activities and not merely as the interaction of supply and demand. Using evidence from Chimwemwe, a formal municipal township in the city of Kitwe, and a questionnaire survey amongst registered and unregistered real estate agents, the study found that most “market transactions” in low-cost formal settlements are facilitated through social networks of friends, relatives, and neighbours and through informal agents, and minimally through formal agents. These transactions are then legally registered at the Council Deeds Registry for legal transfer. Despite the existence of the Estate Agents Act of 2000, and the establishment of the Zambia Institute of Estate Agents (ZIEA), the study found that most informal agents have problems complying with the registration provision, thus leaving them to operate illegally. Nonetheless, these informal agents provide a service in low-income settlements through procedures which mirror formal ones, resulting in legally recognised and binding transactions and at cost commensurate to the incomes of their clients. However, the negative traits exhibited by some informal agents cannot be overlooked, thus it is necessary to re-examine the law to understand what is preventing informal agents from complying with this provision on registration.

South Africa’s water regulatory and policy framework: a new institutional economic review

The institutional dynamics , policies, and legislation that were prevalent during the apartheid era have left imprints that are difficult to ignore as they still dictate the interaction between different elements in the water sector to date. The existence of riparian water rights made the legislation excluding and racist as far as water access was concerned because of the indisputable link between land ownership and access to water. Post-apartheid, the National Water Act (NWA) of 1998 has transformed the water regulatory landscape from the riparian system to a system aimed at achieving equitable water allocation for the benefit of all. It has done away with a private right system of water allocation by detaching water rights from land ownership. However, the water sector in South Africa is still facing a number challenges, leading to a delay in achieving some of the goals of the post-apartheid water law. This paper provides a review of relevant water policies and/or statutes from a new institutional economics (NIE) perspective to assess the success, or lack thereof, of post-apartheid water policy in South Africa. This paper found that South Africa’s water policy is premised largely on neoclassical economics framework. It concludes that the failure of the NWA and other institutions to incorporate social norms and customs is more likely to the persistence of skewed distribution of water resources.

Functions of intermediaries in arts-based cooperations

PurposeArts-based cooperations between business and the arts create innovative solutions for companies by introducing artistic practices. Cooperations of this nature are predominantly prepared and implemented by intermediaries who act as “matchmakers” and bridge the cultural clash. The paper aims to discuss these issues.Design/methodology/approachFor the present study on the function of such intermediaries, qualitative data material from interviews and case studies on arts-based cooperations was collected and analysed.FindingsThis paper analyses the results from an institutional economics perspective. By drawing on transaction cost theory and information economics, the findings are transformed into an intermediation theory of arts-based cooperations. The theory postulates that intermediaries are able to reduce transaction costs as well as the risks which are contingent on asymmetric information. Involving an intermediary produces cost advantages compared to direct contact between companies and artists.Originality/valueThe analysis illuminates an important but heretofore neglected aspect of arts-based initiatives thus providing an indication for their successful implementation.

Approaches to Identification of Institutions in Institutional Economics

The paper deals with the methodology for identification of institutions from institutional economics perspective. The differences between the perspectives provided by old and new institutional economics are highlighted. These differences are interpreted in the context of compared pragmatist and postpositivist methodologies. This paper applies to the post-positivist approach to the identification of institutions. One example of institution is provided by power-property institution. Identification of this institution in the historical and economic research is based on several theoretical generalizations and supported by array of historical facts. Another example is provided by identification of institution and institutional change in higher education based on discourse analysis and interviews with the main actors. In this paper, the regulatory institutions of higher education are analyzed as well. The concept of power-property institution is extended to the higher education by proposing hypotheses on the functioning of state governing-regulating institution in this sphere. This institution prescribes the actors to behave in accordance with the objectives of public policy, which can only be implemented in the form of bureaucratization of higher education. The paper describes the behavioral regularity generated by an identified institution. Functioning of the governing-regulating institution in higher education is illustrated by examples of behavioral regularities emerging from activities in accordance with this institution. The paper also shows the possibility of falsification of proposed hypothesis.

Standard-setting activities and new institutional economics

AbstractFrom a New Institutional Economics (NIE) perspective, standards are acknowledged to play a central role in building efficient market infrastructure by defining what is exchanged and reducing the level of transaction and measurement costs. Nevertheless, only a few prior NIE studies have considered standard-setting activities as coordination and governance issuesper se. This article aims to fill this gap by adapting and extending the classical Williamsonian analytical framework to the governance of standard-setting institutions. This analysis is substantiated by empirical data on global private standards in the agricultural sector. Our results highlight the importance of standard selection and the limits to current harmonisation as regards institutional failure to define alternative multilateral governance mechanisms at the international level.

Corporate Governance Theories in the New Institutional Economics Perspective. The Classification of Theoretical Concepts

Corporate Governance Theories in the New Institutional Economics Perspective. The Classification of Theoretical Concepts

Whither ‘New Institutional Economics’?

The International Society for New Institutional Economics has changed its name to Society of Institutional and Organizational Economics (SIOE). Does this mean that its Coasean mission, ‘to replace the current analysis with something better’, will be abandoned? We do not think so. The insights of the ‘New Institutional Economics’ were too big of an ‘aha’ experience for economists for its ideas to vanish into thin air due to a renaming of its scientific society. In any case, economists can hardly continue trying to adapt reality to their mechanical micro- or macroeconomic devices by neglecting or bending information on ‘economic structure’ (read: ‘economic institutions’) as they see fit. The New Institutional Economics might help economists to become more open-minded towards the social sciences, and more willing to include detailed institutional structures into their analysis. We proceed as follows: taking the European Monetary Union (EMU) as an example, we demonstrate that the analytic techniques of the New Institutional Economics as applied to relationships between private people can also be applied to relationships amongst public bodies. For that purpose, we first give a short description of the early history and structure of EMU. After that, we illustrate how the advantages and drawbacks of this supranational organisation appear from the perspective of the New Institutional Economics.

Arbitration from a Law & Economics Perspective

International arbitration and Law & Economics (LE and they are both hotly contested and discussed in all their facets. 15 years ago, it was lamented that L&E had neglected (international) arbitration to large extent, focusing instead on judicial contexts. This chapter analysis international arbitration from an L&E perspective, including subsequent developments by behavioral economics relevant to arbitration. After providing a general institutional economics perspective on arbitration, we go into greater detail concerning some questions where L&E can contribute by focusing on disputants involved in arbitration, their incentives and decision-making, including among types of dispute settlement, arbitrator appointment, incentives for settlement and third-party funding. We also discuss the incentives and behavior of arbitrators, including their cognitive abilities.

Foundations of the parametric strategic management: An institutional economics perspective

The article suggests the idea of parametric strategic management based on using institutions, or "rules of the game", as control parameters ensuring targeting of sustainable states, functioning modes and development trajectories (attractors) of the managed economic system, in particular, economic organization. The rules themselves do not contain directions of changes towards target attractors. The Coase theorem appears to be the economic foundation of the proposed approach.

Reform of Compulsory Education Teachers’ Communication System from the Perspective of New Institutional Economics

According to the four main theory of transaction cost theory, property rights theory, state theory and the theory of institutional change from the new institutional economics, this paper gives a theoretical analysis about our country’s compulsory education teacher exchange system and puts for ward the reform path of the system.

BANKING UNION AS AN INSTITUTIONAL RESPONSE OF THE EUROPEAN UNION TO THE FINANCIAL CRISIS 2008–2009

The Banking Union, which formally commenced its operations on 4 th November 2014, is an institutional response of the European Union to the financial crisis of 2008–2009. From the institutional economics perspective it has been a breakthrough comparable to the decision on the establishment of economic and monetary union. The aim of the paper is to analyze some institutional change related to the process of integration of banking sector in the euro zone countries within the architecture of the Banking Union. The focus of the analysis is on the fit between existing institutions, to a large extent formal one meaning legal framework to a newly introduced regulations. We employ a descriptive analysis which is frequently used as the method within new institutional economics. Through scrutiny of institutional development we come to the conclusion that the banking union is not well-designed institutional scheme for potential crisis ahead. In particular, we argue about potential weaknesses of the process due to the adjustment of new framework to the existing institutional conditions. The major risks come from complexity of previous institutional settings and replaying them with the new harmonized set of regulation that are accompanied this diversity of informal institutions in different Member States as well as not harmonized set of sanction system. However, we envisage that such changes are necessary in order to avoid externalities caused by complicated and overlapping institutional design of the Banking Union.

The Institutional Fundamentals of Turkey's Economic Performance: A New Institutional Perspective

Abstract. In this thesis, the effect of Turkey's institutional structure on economic performance is analyzed by using transaction cost and credible commitment which are contributed by New Institutional Economics. According to this school, neoclassical economics ignores transaction cost, bounded rationality, incomplete contracts and property rights. So these models will not represent the real world. But it's known that the transaction cost is always positive in the real world. According to this reality, to begin with the institutions containing the New Institutional Economics are investigated and the relationship between institutions and economic performance is explained. Afterwards defining, measuring and effects of transaction cost topics are mentioned. Soon after we handled the political transaction cost. In the next chapter, the policymaking process and credible commitment are explained. The role of institutions on formation of institutional policies and the 3 determiner legislative-executive-judiciary and the seperation of powers are discussed and credible commitment is clarified in this context. By giving the theoretical framework of this issues, Turkey's progress is reviewed. The important contribution of this thesis is by following New Institutional Economics perspective, first defining the political transaction cost and credible commitment and after showing the effects Turkey's institutional structure to economic performance by using time series analysis with structral breaks. Findings indicate that the transaction cost and credible commitment determined by institutional structure are highly important on investment decisions and national income. Anahtar Kelimeler: New Institutional Economics, Transaction Cost, Credible Commitment, Institutional Structure, Structral Breaks, Co-integration. Keywords. New Institutional Economics, Transaction Cost, Credible Commitment, Institutional Structure, Structral Breaks, Co-integration. JEL. B15, B25, B52, D23, L14. Highlights * Turkiye’de kurumsal yapinin ekonomik performans uzerine etkisi incelenmistir. * Kurumlar, islem maliyeti, politik surec ve guvenilir taahhude iliskin literatur taranmistir. * ICRG’den temin edilen verilerle es-anli ve yapisal kirilmali esbutunlesme analizi uygulanmistir. * Sonuc olarak Turkiye’de kurumsal yapi, ekonomik performans uzerinde onemli derecede etkilidir.