Transaction Cost Economics Perspective Research Articles

Adopting environmentally-friendly certifications: transaction cost and capabilities perspectives within the Italian wine supply chain

Purpose Environmentally-friendly certifications have increased over the past decade within food supply chains. Although a large body of literature has explored the drivers leading firms to adopt such certifications, it has not closely examined the strategic motivations associated with their adoption. This paper aims to investigate an environmentally-friendly certification, VIVA, examining its role as an alternative form of supply chain governance. The aim is to investigate the drivers affecting the adoption of VIVA and to assess managerial perceptions related to transaction-related characteristics and the firm’s internal resources and capabilities. Design/methodology/approach This study draws upon both an extended transaction cost economics perspective, which is based on transaction risks and the resource-based view, which examines a firm’s internal resources. A survey was conducted via a structured questionnaire sent to all of the wine producers in charge of the decision regarding whether to adopt VIVA certification. A Hierarchal Bayesian Model was applied to analyse questionnaire responses. Such a model allows us to specify the probabilistic relationship between questions and latent constructs and to carry over uncertainty across modelling levels. Findings The adoption of this environmentally-friendly certification is envisioned as a tool to curb internal risks, and thus to manage behavioural uncertainty within the supply chain. A high level of exposure to exogenous transaction risks discourages firms from adopting VIVA certification. The certification system is not perceived as a promoter of operational capabilities. Managers are more likely to implement the certification when they expect that its adoption will leverage their potential knowledge of the supply chain or prompt new and better collaborations with the suppliers. Therefore, the certification can become a resource that interacts with the capabilities of the firm, expressing complementarities that stimulate the formation of dynamic capabilities. Research limitations/implications The identification of drivers from the two theoretical perspectives offers insights into the attributes that are perceived as important by managers and which, therefore, could be leveraged to foster the adoption of the environmental certification. The external validity of the study could be improved by extending the sample to other certifications and supply chains. Originality/value The study offers a different perspective on environmental certification. It demonstrates that considering the certification as an alternative form of supply chain governance opens up a set of efficiency and strategic considerations that could be addressed to promote the effectiveness of an environmental strategy within a supply chain

WHY DOESN’T JAPAN HAVE A NATURAL GAS PIPELINE NETWORK? CONSIDERATION FROM THE DETERMINANT OF THE CHOICE BETWEEN LNG TANK TRUCKS AND PIPELINES

This study considers the importance of comprehensive pipeline network plans with exploring the determinants of vertical integration in Japan’s natural gas distribution utilities from the perspective of transaction cost economics. Japan’s natural gas industry is reliant on imported liquefied natural gas (LNG) that normally requires regasification prior to consumption. Unbundling of the industry has not been enforced and while some local distribution utilities purchase gas via pipelines that is regasified by the seller, others choose LNG from tank trucks with subsequent regasification occurring in-house (vertical integration). Estimating the determinants of vertical integration in terms of transaction cost economics, I deduce the cause of poor pipeline networks in Japan. This study found that local distribution utilities prefer to purchase natural gas via pipelines when there are neighboring wholesalers or utilities. Hence, a broad pipeline network has never been constructed because local distribution utilities construct point-to-point pipelines to neighboring utilities or wholesalers. This indicates that without pipeline network planning by the government, comprehensive infrastructure policies, or financial support, a broad pipeline network will not be built throughout the country.

What Drives Different Governance Modes and Marketization Performance for Collective Commercial Construction Land in Rural China?

The collective commercial construction land (CCCL) reform in China has attracted considerable attention worldwide, but studies on the influencing factors and performance of governance modes for CCCL marketization are still in their infancy. First, by deconstructing CCCL, this study developed a conceptual framework from the perspective of transaction cost economics. Based on a series of surveys, interviews, and closed questionnaires in two pilot areas, this study determined the influencing factors for governance mode choice for CCCL marketization through comparative case studies and compared the performance of the government-led and self-organized modes. This study concluded that asset specificity, uncertainty, and frequency were the main influencing factors for transaction costs, which could influence the choice of governance mode for CCCL marketization. Moreover, the characteristics of the two aforementioned governance modes, transaction costs, and specific revenue distribution resulted in different marketization performances.

Effects of open innovation breadth on industrial innovation input–output relationships

PurposeOpen innovation breadth (OIB) considers the diversity of external collaboration partners for innovation. The authors investigate the moderating effect of OIB on the relationship between industrial innovation activities (innovation inputs) and industrial innovation results (innovation outputs).Design/methodology/approachThis study is based on secondary data from the Brazilian innovation survey, representing more than 30,000 innovative companies across 55 industrial sectors.FindingsThis study’s results show that OIB has different moderating effects regarding the several innovation input–output relationships. While OIB benefits some relationships, others are hampered by the diversity of collaboration partners.Originality/valueFew studies have addressed OIB at the macro level. Using the perspective of transaction cost economics (TCE), the authors discuss the contributions and limitations of OIB at the industry level.

The Effects of Contract Detail and Prior Ties on Contract Change: A Learning Perspective

Despite the large literature on alliance contract design, we know little about how transacting parties change and amend their underlying contracts during the execution of strategic alliances. Drawing on existing research in the alliance contracting literature, we develop the empirical question of how contract detail and prior ties influence the amount, direction, and type of change in such agreements during the collaboration. We generated a sample of 115 joint ventures (JVs) by distributing a survey to JV board members or top managers and found that the amount of contract change is negatively associated with the level of detail in the initial contract but is positively associated with the number of prior ties between alliance partners. In relation to the direction of contract change, we find that the level of detail of the initial agreements negatively correlates with the likelihood of removing or weakening existing provisions and that prior collaborative experience positively correlates with the likelihood of strengthening of existing provisions or adding of new ones. We also find that prior ties affect the type of change in that JV parents prefer to change enforcement provisions more so than the coordination provisions in the contract. Our paper generates new insights on the complementarities between relational governance and transaction cost economics perspectives on alliance contracting.

Startups, relocation, and firm performance: a transaction cost economics perspective

Built on a transaction cost economics (TCE) perspective, this study investigates whether startups’ early growth prompts them to relocate to a new place, and, if so, how long-distance versus short-distance choices affect their post-relocation performance in the market. The empirical findings using 4928 US startups from the Kauffman Firm Survey dataset are three-fold. First, startups are more likely to move as they grow in the developmental process of entrepreneurship. Second, startups realize higher levels of performance in terms of firm survival and sales growth only through transaction cost-minimizing intra-state relocation, not through inter-state relocation. Third, the superior performance of intra-state relocation of startups seems to be mitigated when they conduct location-independent businesses using Internet-based on-line transactions. The study concludes with managerial and public policy implications from these empirical findings.

Does second-order social capital matter to green innovation? The moderating role of governance ambidexterity

Despite the importance of social capital on green innovation has been recognized, our knowledge of the influence of second-order social capital is still unclear. Based on social exchange theory and transaction cost economics perspective, we develop hypotheses regarding the impacts of second-order social capital on green innovation, as well as the moderating role of governance ambidexterity (i.e., balanced dimension and combined dimension). We use questionnaires to collect data from 212 Chinese firms and conduct hierarchical regression analysis to test hypothesized relationships. The results suggest that second-order social capital from both customers and suppliers have positive effects on green exploitative innovation and exploratory innovation. Balanced dimension strengthens the effect of second-order social capital from customers on green exploratory innovation while weakens the effect of second-order social capital from suppliers on green exploratory innovation. Further, combined dimension strengthens the effect of second-order social capital from suppliers on green exploitative innovation while weakens the effect of second-order social capital from customers on green exploitative innovation. This research enriches the literature on social capital and green innovation.

Open-book accounting no relacionamento entre comprador e fornecedor no setor agroindustrial

Objetivou-se identificar como o OBA (Open-Book Accounting) é praticado no relacionamento entre uma empresa agroindustrial e um de seus fornecedores diretos, na perspectiva da ECT (Economia dos Custos de Transação). Trata-se de estudo de caso único e díade. Empregaram-se entrevistas semiestruturadas, análise documental e observação direta para coleta dos dados e análise de conteúdo para análise. Verificou-se que o OBA é aplicado bilateralmente, com detalhamento amplo de informações pelo fornecedor, e estreito e eventual pela compradora. Sua aplicação não foi imposta e emergiu pela confiança e benefícios mútuos estabelecidos, ampliação de negócios conjuntos e contrato exclusivo de fornecimento. No caso específico da empresa compradora, o propósito principal do OBA é apoiar o TCO (Total Cost of Ownership), empregado para seleção e (re)negociação com fornecedores. Conclui-se que o compartilhamento consensual de informações, prevendo benefícios mútuos, aumenta a disposição ao OBA e as chances de identificação de oportunidades de redução de custos.

How does contract completeness affect tacit knowledge acquisition?

PurposeThis study aims to empirically investigate the role of contracts in tacit knowledge acquisition in research and development (R&D) alliances. By combining the perspectives of sensemaking and transaction cost economics (TCE), this study proposes a model about the mechanisms through which shared goals and contract completeness jointly affect tacit knowledge acquisition.Design/methodology/approachThis study adopted a quantitative design and used the questionnaire survey method to collect data. The authors finally collected data on 196 R&D alliance samples in China. Multiple regression analysis was used to test the hypotheses.FindingsThere is strong empirical support that contract completeness has a positive effect on shared goals and that shared goals have a positive effect on tacit knowledge acquisition. Meanwhile, contract completeness weakens the positive effect of shared goals on tacit knowledge acquisition. Therefore, this study reveals that contract completeness has an inverted U-shaped effect on tacit knowledge acquisition.Practical implicationsThe findings suggest that managers should consider both the psychological and rational effects of contract governance simultaneously, thus recognizing the importance of a moderate level of contract completeness for tacit knowledge acquisition in R&D alliances.Originality/valueThis study enhances the current understanding of contract governance by integrating the sensemaking and TCE perspectives. The findings provide a possible explanation of how contracts affect tacit knowledge acquisition in R&D alliances. The authors expand the research on contract governance and alliance knowledge acquisition by revealing the inverted U-shaped relationship between contract governance and tacit knowledge acquisition.

Acquiring air quality monitoring data through the hierarchy or the market: A case study of Shandong province, China

This article investigates the principal-agent problem in acquiring air quality monitoring data through the government hierarchy in China and uses Shandong as a case study for illustrating how it is addressed by resorting to a market approach. Adopting transaction cost economics perspective, we analyzed contractual hazards in both relying on the hierarchy and the market. We found the Shandong provincial environmental protection bureau has specified eligibility criteria and crafted contract terms that can reduce the risk of being held up resulted from asset specificity, increase efficiency, improve observability of both input and output quality, and induce accountability by enforceable rewards and sanctions. The lessons learned contribute to the literature on multi-level environmental governance and are useful for institution building for achieving sustainable development in China and beyond.

The impact of knowledge diversity: Integrating two economic perspectives through the dynamic capability approach

This paper analyzes the two economic perspectives underlying the contradictory results of existing studies regarding the relationship between diversity and performance and integrates them using the dynamic capability approach. Transaction cost economics suggests that knowledge diversity has a negative impact on cost‐saving performance, whereas evolutionary economics suggests that knowledge diversity has a positive impact on value‐creation performance. According to the dynamic capability approach, the perspective of transaction cost economics is shown to relate to ordinary capabilities, whereas the perspective of evolutionary economics is shown to relate to dynamic capabilities. The former should be pursued in subservience to the latter.

The Farmers’ Willingness to Enter the Collective Construction Land Market from the Perspective of Transaction Cost Economics: An Empirical Analysis of Nanhai District

Considering the transaction cost of the existing transaction rules of collective construction land, in order to explore the farmers’ willingness to enter the market from the perspective of transaction cost economics, based on Logistic regression model, combined with the field survey data in Nanhai District, quantitatively analyzed the farmers’ willingness to enter the market.

Blockchain technology and startup financing: A transaction cost economics perspective

Cryptocurrencies (e.g., Bitcoin, EOS, Etherum, Litecoin, and others) are disrupting the traditional banking and financial systems. The cryptocurrencies are based on a set of technologies commonly referred to as blockchain technology. The potential effect of blockchain technology on institutional economics is profound. Already, blockchain technology-based applications in supply chain management, marketing, and finance are decentralizing and streamlining vital institutional functions. In this paper, we examine the economics of blockchain technologies as it pertains to transaction costs in startup financing. We draw upon the theory of transaction cost economics and the transactional nature of blockchain technology to propose a model to demonstrate how and why blockchain technology based applications are effective. We then apply the model to demonstrate how blockchain technology can be used to overcome many problems inherent in startup financing. For example, information asymmetry and transaction costs involved with matching an entrepreneur with an investor and the terms of the financing deal are some of the fundamental issues in entrepreneurial financing. We explain how a financing system based on blockchain technology can ameliorate the problems and lead to a more effective and decentralized entrepreneurial financing process.

Does TMT cultural diversity contribute to firm performance and do socialisation and tenure matter? A test of two competing perspectives

PurposeThe purpose of this paper is to establish the effect of top management team (TMT) cultural diversity on firm performance with a framework that considers such an effect from both cost and benefit perspectives. The paper also examines whether and how diversity management mechanisms such as socialisation and tenure may moderate the effect of TMT diversity on firm performance.Design/methodology/approachDrawing upon two competing perspectives of resource-based view (RBV) and transaction cost economics (TCE), this paper theorises and tests the potential positive and negative effects of TMT cultural diversity on firm performance with 442 publicly listed IT companies in the USA.FindingsThe results supported the RBV prediction that TMT cultural diversity enhances firm performance and socialisation strengthens the positive effects of a culturally diverse TMT on firm performance. However, tenure was not found to be important in promoting diversity gains or mitigating diversity costs. By showing clear support for the RBV prediction of the positive impact of TMT cultural diversity and refuting the TCE prediction of the potentially negative effects, this research strengthens the business case for embracing cultural diversity in TMTs.Originality/valueThis paper contributes to the current literature by developing a more balanced framework to deepen our knowledge of how TMT cultural diversity may impact firm performance, and how the use of socialisation and tenure may moderate the TMT cultural diversity–firm performance relationship from both cost and benefit perspectives.

The problem of regulatory arbitrage: A transaction cost economics perspective

AbstractRegulatory arbitrage, or the ability of financial firms to circumvent or neutralize rules, is a classic problem of financial regulation. This article draws on transaction cost economics (TCE) to reformulate this old problem, thus defining regulatory arbitrage as a contracting hazard arising from interactions between the regulator and regulated firms, given bounded rationality and opportunism. Following standard TCE, the article first characterizes the implicit regulatory contract in finance, focusing in particular on the mobile and elastic nature of regulated actors and financial assets as well as the contested utility of financial innovation. It is then argued that this incomplete and hazard‐prone regulatory bargain must be matched with a governance structure that both adapts to unforeseen circumstances and avoidance strategies and copes with radical uncertainty about the welfare consequences of financial innovation. To that end, the article discusses how a governance structure here termed “relational regulation” might facilitate suchex postgovernance under uncertainty.

Public–private partnership governance mechanism analysis using grounded theory

Governance mechanisms of public–private partnership (PPP) projects can alleviate opportunism behaviours and indirectly reduce transaction costs from the perspective of transaction cost economics. This paper analyses 40 PPP projects in 14 provinces and municipalities across China using the grounded theory and finds that the key attributes for contractual governance are risk sharing, procurement methods, rights allocation and financing mechanisms. The core mechanisms for relational governance are trust in competence, reputation, institutional trust and commitment-related trust. Applying this system in project governance helps enhance project performance.

The Effects of Opportunism and Bounded Rationality on MNC Subsidiary Ownership: A Behavioral TCE Perspective

This study aims to demonstrate the value of expanding transaction cost economics (TCE) into a behavioral theory of organizational decision making by studying how multinational corporations (MNCs) make subsidiary ownership decisions. We propose that TCE can be rendered behavioral by doing two things with regard to its opportunism and bounded rationality (BR) assumptions. First, according to the value-attitude-behavior hierarchy, we distinguish between opportunism and BR as values as opposed to as attitudes, and suggest that opportunism and BR be studied at the attitude level. Second, we theoretically separate BR from opportunism, and expand BR to include psychological bounds. The expanded BR is then used to link TCE with prospect theory and organizational learning, thus making TCE behavioral. Empirically, we take an institutional approach to operationalizing opportunism and BR as attitudes. We then examine their separate and joint effects on subsidiary ownership, and how MNCs can learn to reduce BR under the constraint of opportunism and adapt subsidiary ownership levels toward more rational direction. A longitudinal dataset (1996–2005) of 10,687 Japanese subsidiaries founded in 42 host countries was used for empirical testing, and the results largely supported our hypotheses. We discuss the theoretical and practical implications of building a behavioral theory of subsidiary governance.

The effects of trust and distrust on ICT-enabled information sharing in supply chains

PurposeDrawing on transaction cost economics (TCE) and social exchange theory (SET), the purpose of this paper is to explain why and how external environment, governance structures and interpersonal relationships influence information and communication technology (ICT)-enabled information sharing in supply chains (SCs) of small- and medium-sized enterprises (SMEs) from developing economies.Design/methodology/approachThe authors adopt a theory-building approach using a multiple case study design, including four SMEs operating in SCs from two developing economies (i.e. Republic of North Macedonia and People’s Republic of China), in which the authors conduct both within-case and cross-case analyses.FindingsSocial bonds (known as vrski in Macedonian and guanxi in Chinese) were found to govern buyer–supplier exchanges by supporting the establishment of personal trust and the reduction of distrust. These social bonds compensate for the institutional deficiencies in developing economies and thus encourage ICT-enabled information sharing by SMEs in their SCs.Research limitations/implicationsBy applying the theoretical perspectives of TCE and SET to the cross-case analysis, the authors develop nine propositions to explain ICT-enabled information sharing and its interdependencies with external environment, governance structures and interpersonal relationships in developing economies. Further research is recommended to refine and test the generalizability of the theoretical model.Practical implicationsFirms have to develop and nurture social bonds with their suppliers from developing economies to reduce risks related to the environmental uncertainty and institutional voids. This can increase trust and decrease distrust associated with ICT-enabled information sharing.Originality/valueThe study examines why and how external environment (environmental uncertainty and institutional environment), social bonds (vrski and guanxi) and interpersonal mechanisms (trust and distrust) influence ICT-enabled information sharing of SMEs operating in developing economies.

Researching IT multi-sourcing and opportunistic behavior in conditions of uncertainty: A case approach

Multi-sourcing arrangements are a major trend in the contemporary outsourcing landscape, but our understanding of what makes these complex ventures effective remains relatively fragmented. Our study focuses on the multi-sourcing and opportunistic behavior of service providers, and in particular a relatively neglected but major driver of opportunistic behavior, namely the uncertainty surrounding the transaction. Developing an extended transaction cost economics perspective, our investigation focuses on the roles of internal and behavioral uncertainty and the occurrence of opportunistic behavior. We research a rich multi-sourcing case study within the financial services sector and compare and re-analyze a detailed case in the literature. According to our findings, internal uncertainty creates an ‘alignment of actions’ problem between outsourcing partners, while behavioral uncertainty can shape an ‘alignment of objectives’ problem, leading to the occurrence of opportunistic behavior. Our findings further contribute to a more thorough understanding of ways to reduce these uncertainties and facilitate coopetition between multiple vendors.

Trademarks, specialized complementary assets, and the external sourcing of innovation

In this article, I study the relationship between valuable trademarks and a firm’s technology sourcing strategy. The Profiting from Innovation (PFI) and Transaction Cost Economics (TCE) perspectives have generated competing predictions regarding firms’ historical stock of valuable trademarks and their decision to pursue external technology sourcing. To conduct the empirical analysis, I use a sample of innovator firms in the manufacturing sectors from the Division of Innovative Labor survey, matched to the USPTO trademark data. Consistent with the TCE perspective, I find that firms with valuable trademarks are less likely to commercialize external inventions, and are likely to have lower innovation performance if they do so. I further show a boundary condition for PFI such that when firms are new entrants to an industry but already holding valuable trademarks, they are more likely to commercialize external innovations.