Transaction Cost Analysis Research Articles

Production Contracts and Food Quality: A Transaction Cost Analysis for the Italian Durum Wheat Sector

Agribusiness firms requiring a consistent supply of high quality agricultural raw materials have increasingly adopted production contracts to coordinate their supply chains. The present work is aimed to shed light on the role played by sources of asset specificity and uncertainty related to quality strategies in the diffusion of contractual arrangements within the Italian durum wheat sector. To this purpose, factor analyses and probit regressions are estimated in data collected among durum wheat producers. The findings confirm that the role of asset specificity is negligible in presence of staple crops. Moreover, they reveal that experience, transparency and technological stability are all relevant aspects that reduce uncertainty and, in turn, trigger the adoption of production contracts as a governance solution for durum wheat.

What Happened to the Rest? A Principled Approach to Clean-Up Costs in Algorithmic Trading

This article proposes a practical and computationally efficient methodology to assign a value for clean-up cost, the opportunity cost associated with the cancelled portion of an order. Unbiased estimation of clean-up costs is an essential component in performing accurate transaction cost analysis in algorithmic trading. We illustrate with an example drawn from practice. The approach is introduced in the context of cleaning up orders in algorithmic trading. However, it is straightforward to modify it for other settings where market data needs to be properly adjusted for realized impact. This new approach will be of interest to academics and practitioners alike.

The evolution of retail channels in China since 2000

Drawing from premier marketing reports and retailing literatures about China, this article analyzes the evolution of retail channels in China from 2000 to 2015. Under the punctuated equilibrium paradigm, we examine the interactions between retailers and consumers by using competitive and transaction cost analysis. We find that China’s retail channel evolution since 2000 has been driven by unique factors: (a) the government’s economic reform policies and the introduction of Internet technology; (b) behavioral differences based on an urban-rural dualism; and (c) the deep penetration of mobile devices and social media platforms. Based on this analysis, the article concludes with predictions for the future development of retail channels in China.

Purchaser perceptions of early phase supplier relationships: The role of similarity and likeability

We investigate trust formation in the understudied area of early-phase relationship and its effects on the selection of purchaser-supplier governance. The theoretical framework underlying the research draws on purchaser/supplier relationships, swift/affective trust formation, social exchange theory, and transaction cost analysis to develop the hypotheses. This study is the first to provide insights into early phase relationships and demonstrate that purchaser-supplier similarity and supplier’s likeability are significantly related to purchaser trust in suppliers. In particular, similarity has a stronger positive relationship with trust than supplier likeability. The combined results of a field study and a scenario-based experiment offer strong evidence that suppliers’ similarity and likeability play a key role in forming early trust and governance selection.

Fair payments for privacy-preserving aggregation of mobile crowdsensing data

With the advent of mobile crowdsensing, the mobile devices equipped with a variety of sensors (such as accelerometer, gyroscope, microphone etc.) are used to collect sensory data. A data aggregator processes the collected sensor data to deliver various services such as traffic management, health care and environmental monitoring. To ensure the privacy of the data, privacy-preserving aggregation (PPA) has attracted much attention since it can find aggregated statistics on the encrypted data. In this paper, we extend the existing PPA schemes in two directions: (1) Aggregator unforgeability – The aggregator performs the aggregation operation correctly. Although there are some schemes which consider aggregator unforgeability, they rely on cryptographic techniques. (2) Fair payments – The data owners receive the payments for their data contribution if and only if the aggregator receives the data. Contrary to existing works, we achieve the aggregator unforgeability and fair payments by modeling the aggregator as a smart contract running on a public Blockchain network. We design two PPA schemes FairNaivePPA and FairPPA for secure aggregation of MCS data with fair payments. We show the financial and transactional cost analysis of proposed contracts by implementing them in solidity and running them on Ethereum Blockchain.

The transaction cost analysis and future development of the “blockchain + audit” industry—— based on the analytic hierarchy model and the perspective of industry life cycle

The rise of “blockchain +” has a great impact on all fields and even the whole social and economic situation, and is no exception to the audit work. Blockchain has the characteristics of non-tampering, timestamp, grid consensus and so on, which is in line with the requirements of the audit work to pursue efficiency and effect. Under such a development background, the “blockchain+audit” industry arises from this. The integration of blockchain into audit engagements, in turn, changes the proportion of audit transaction costs. Based on this background, the Analytic Hierarchy Process (AHP) is used to analyze the transaction cost of audit. In view of the problems found in the current transaction cost analysis of “blockchain+audit”, combined with the research on the future development trend based on the theory of technological innovation and industry life cycle, this paper puts forward some suggestions to effectively control the audit cost and improve the audit efficiency. The aim is to provide a practical reference basis for the better application of blockchain technology in auditing.

Transaction Costs Data Impact on Process Self-Organization Evaluation of Quality Management System

This paper will focus on the transaction costs analysis approach to estimating the level of quality management systems self-organization. It became possible to consider transaction costs in quality management systems with the reclassification of consumer. A suggested classification of consumers includes both “external’ and “internal” consumers and also “hidden” and “latent” consumers. Another approach of accounting costs and consumers data allowed us to analyze quality management systems by the share and the level of self-organization.

An Analysis of the Beef Production Industry and Marketing in Zambia

This paper studies and provide a comprehensive and critical research by analyzing and evaluating the beef marketing channels, determine marketing efficiency, examine key social and economic factors contributing to the success and failure and establish the regional market interactions across the three agro-ecological regions in Zambia.
 To achieve this, the research used both primary and secondary qualitative and quantitative data from national representative surveys by Rural Agricultural Livelihood Surveys Reports which were implemented by Indaba Agricultural Policy Research Institute, and the 2017/18 Livestock and Aquaculture Census Report by Ministry of Fisheries and Livestock, Central Statistics Office, and other relevant literature related to this study. A questionnaire was used in primary data collection through snowball sampling technique, physically asking, and observing cattle farmers, abattoirs, wholesalers, processing companies and various players or actors in the beef market. Thereafter, intermediation theory was applied to develop a conceptual framework, transaction cost analysis was used to understand how and why different supply channels develop, and finally market performance was determined by analyzing the level of marketing margins.
 It was found that there are two major channels (Channel A and Channel B used by small-scale and commercial scale farmers respectively) which have channel subdivisions and several social and economic factors influence the farmers choice of marketing channel as well as influence consumer choices. Channel A was dominated by intermediaries while channel B be was vertically integrated. It was determined that all beef channels in Zambia were efficient and three major consumer types were observed and the regional market interactions showed that region I supplies both II and III, region II supplies III while region III is more of a consumer region.
 This study will help to fully understand cattle producers marketing channel selection, consumer choice of market and product quality, regional market interactions and develops recommendations making available valuable information to farmers, beef traders, companies, and policy makers thereby has the potential to improving beef trade and markets in Zambia.

International Review of Equity Market Structure Regulation, Phase 2: Quantitative Analysis

Phase II of PIFS’ international review of equity market structure regulation sets forth a quantitative analysis of equity markets in the People’s Republic of China (including both the Mainland market and the Hong Kong Special Administrative Region), the European Union, Japan, and the United States. In Part I: Market Characteristics, we present summary statistics as to trading volume in each market, including recent trends and the share of on-exchange and off-exchange trading from 2011 until the end of 2019. We also address the relative share of trading volume attributable to institutional investors as compared to retail investors and compare trade sizes in each market. We find that on-exchange trading volumes and the share turnover ratio in Mainland China have significantly increased since 2011, as compared to the other four markets. We also find that a significant percentage of trades are executed off-exchange in the E.U. and U.S. but not in Hong Kong or Mainland China. In Part II: Comparative Analysis of Trading Costs, we review non-public datasets from Virtu Financial and AbelNoser, two leading global providers of transaction cost analysis, to assess the performance of global equity markets for institutional investors. We have not been able to identify data to compare retail trading costs across markets, however, as demonstrated in Part I, the majority of trading volume in the E.U., Hong Kong, Japan and U.S. markets is institutional. In Part II, we evaluate changes from 2015-2019 in each of the markets as to institutional order size, brokerage commissions, price impact and overall trading costs. Three key findings are apparent from our review. First, price impact costs are the primary driver of overall trading costs for institutional investors across all five markets. Second, brokerage commission costs have significantly declined across all five markets and overall trading costs have also generally declined in recent years. Third, the United States has the lowest overall trading costs of the five major markets.

The Nature of the Fintech Firm and its Implications for Financial Regulation

This chapter explores recent Fintech innovations through the lens of Ronald Coase’s classic article: The Nature of the Firm. Applying a transaction cost analysis, the chapter argues that developments in computer technology, data processing, and information networks are reshaping the manner in which financial services are produced, unsettling the boundaries separating regulated firms from outside vendors and open market transactions. These changes raise challenging questions as to the appropriate contours of regulatory perimeters as well as the structure of regulation and supervision in the many area of financial regulation. Fintech innovations also have the potential to be harnessed to serve public purposes, including expanding access to financial services and improving supervisory practices. At a minimum, Fintech innovations and most especially machine learning and artificial intelligence complicate the application of legal doctrines based on human intentionality. More broadly, the scale and scope of these technological developments may lead to a fundamentally rethinking of the appropriate goals of regulatory policy for financial firms and the economy more broadly, particularly with respect to privacy and the accumulation of personal information in private and public hands.

The Role of Marketing in Digital Business Platforms

Digital business platforms (DBPs) such as eBay, Google, and Uber Technologies have seen enormous growth; this paper explores their salient characteristics, the role of marketing in helping DBPs succeed, and important research topics for theory and practice. A new conceptual framework based on insights from transaction cost analysis outlines the role and impact of marketing in DBPs. A key role for marketing is to increase the number and quality of interactions on a DBP while reducing transaction costs for users and production costs for the DPB. The DBPs' interactions and the data thus generated are key enablers of value creation and value appropriation on these platforms. However, there are several challenges to resolve in value creation and value appropriation because DBPs cater to the needs of many different types of users. Therefore, DBPs should carefully coordinate and manage interactions among users on different sides of a platform. For researchers, there are many opportunities to reconceptualize some of the traditional roles of marketing in the context of DBPs.

Does transportation size matter for competitiveness in the logistics industry? The cases of maritime and air transportation

This study has been designed to investigate the determinants of competitiveness in the logistics industry. In particular, we focus on the expansion of transportation as a central theme. Size and economy of scale are important issues in many industries. Previous studies have typically highlighted the positive aspects of large scale in terms of competitiveness. However, this study acknowledges that the large scale of transportation means, such as container ships and cargo planes, may not necessarily be positive for the competitiveness of the logistics industry. We believe that expansion is a double-edged sword. Economy of scale can have negative aspects associated with it. This study analyzes how transportation size affects competitiveness in the logistics industry. Additionally, we discuss other determinants of logistics performance such as ICT capability and green transportation.According to empirical findings, we could not identify a specific relationship between the large scale of marine transportation and logistics performance. Moreover, a negative influence behind the increase in air transportation is discussed. Additionally, this study attempts to establish theoretical foundations for logistics performance. This study has been designed to investigate the impact of transportation expansion on logistics performance based on the RBV, transaction cost analysis (TCA), and institutional theory.

中国市场上供应商的影响战略对 供应商与买方之间关系的影响

This paper is designed to examine how the supplier’s influence strategies have an effect on the supplier-buyer relationship and the guanxi’s moderating role in the their business relationship. In principle, this research is founded on and seeks to validate diverse research constructs in Chinese channel environment, and those have been rigorously discussed by the researchers from the streams of transaction cost theory and relationship exchange theory. The research model in this study is made up of three causal logical nodes-independent variables, mediating variables, and a dependent variable. Importantly, this paper also pays attention to the role of one particular moderating variable, guanxi, which may play a crucial part in the relationship between the independent and mediating variables as well as in the relationship between the mediating variables and a dependent variable. The independent variables are the influence strategies exerted by suppliers and this paper divides six influence strategies into three different categories such as coercive, neutral and non-coercive strategies. Threats and legalistic pleas are categorized into coercive influence strategies, request and promises are classified into neutral influence strategies; further, recommendation and information exchanges are regarded as non-coercive strategies. The mediating variables in this study are opportunism and mutuality which are intrinsically rooted in the two different research streams; the one is originated from TCA(transaction cost analysis) theorists and the other is emerged from the relationship exchange scholars. The final node, the dependent variable, is a long-term orientation that almost all the suppliers and their buyers may pursue. The unit of analysis is a buying firm and respondents for this data collection are employees or owners who are actually involved in the business transaction process with their suppliers. 370 valid questionnaires were obtained and used to verify proposed research model and several hypotheses between the antecedents and mediating variables, and those with dependent variables. The structural equation model is employed to test the research model and a series of research hypotheses. We verify that supplier’s non-coercive influence strategies are beneficial to relationship between the supplier and the buyers. Coercive influence strategies are inefficient to the supplier-buyer relationship. Neutral influence strategies have ambivalent(positive and negative) consequences on the relationship. Further, we identify that guanxi has significant moderating effects on the supplier-buyer relationship. This paper discusses the research findings and proposes the future research directions.

Mapping the supply chain of ship recycling

Ship recycling refers to the process of dismantling vessels with the purpose of extracting and recovering materials for reuse, particularly the steel. The aim of this paper is to map the supply chain of ship recycling. This exploratory and qualitative research provides a glimpse on how regulations influence the supply chain management through inter-organizational arrangements. It considers the trade-offs and combinations of financial and sustainable values that, in many ways, determine these inter-organizational arrangements. Preliminary findings show that there are conflicts of interest with the ship recycling stakeholders. Although compliance of regulations should foster better transparency in the supply chain, these regulations have not yet fully embraced social aspects, such as the fact that domestic demand and supply for steel, as well as many jobs, are dependent on this industry. On the contrary, the initiatives to regulate ship recycling might induce negative effects. This paper suggests that transaction costs analysis and the principal agency theory are two complementary theories for analyzing inter-organizational relationships in the supply chain of ship recycling.

Antecedents to buyer-supplier coordination in the pharmaceutical supply chain

PurposeThe purpose of this study is to understand the antecedents that influence supply chain coordination in the pharmaceutical supply chain using the transaction cost analysis framework.Design/methodology/approachData from 156 retail pharmacies on their relationship with the pharmaceutical wholesalers are used to test the hypotheses.FindingsThe findings of this paper show the importance of antecedents that are based on the transactional cost theory, such as asset specificity and environmental uncertainty. These antecedents impact the supply chain process coordination at different levels – transactional, operational and strategic.Research limitations/implicationsFuture research may investigate additional antecedents using other theoretical lenses.Practical implicationsPharmaceutical wholesalers are dependent on pharmaceutical manufacturers for the supply of products and face intense competition that results in lower profit margins. Given that the pharmaceutical industry is strictly regulated, the wholesaler facilitates regulatory compliance of the manufacturers in the distribution process by coordinating with them. But the wholesalers do also face a constant threat from the manufacturers, who could potentially bypass the wholesalers (disintermediation) and go directly to the pharmacies. To counterbalance the dependence, the wholesalers strive to achieve loyalty with the retail pharmacies. Through supply chain coordination, the wholesalers achieve efficiency in procurement for the pharmacies, thus reducing cost and improving their competitive advantage.Social implicationsSupply chain coordination in the pharmaceutical supply chain improves the safety and security of the pharmaceutical distribution system.Originality/valueThis paper contributes to the supply chain coordination stream of literature. To the best of the authors’ knowledge, this is the first study to develop the three levels of process coordination in the pharmaceutical supply chain context. This paper shows how process coordination can be achieved between the dyad without vertical integration.

A Systematic Review of Blockchain Literature in Logistics and Supply Chain Management: Identifying Research Questions and Future Directions

Potential blockchain applications in logistics and transport (LSCM) have gained increasing attention within both academia and industry. However, as a field in its infancy, blockchain research often lacks theoretical foundations, and it is not clear which and to what extent organizational theories are used to investigate blockchain technology in the field of LSCM. In response, based upon a systematic literature review, this paper: (a) identifies the most relevant organizational theories used in blockchain literature in the context of LSCM; and (b) examines the content of the identified organizational theories to formulate relevant research questions for investigating blockchain technology in LSCM. Our results show that blockchain literature in LSCM is based around six organizational theories, namely: agency theory, information theory, institutional theory, network theory, the resource-based view and transaction cost analysis. We also present how these theories can be used to examine specific blockchain problems by identifying blockchain-specific research questions that are worthy of investigation.

Operational efficiency effects of blockchain technology implementation in firms

PurposeThe purpose of this study is to evaluate the effect of blockchain technology on firms’ operational efficiency in the context of China.Design/methodology/approachThe authors use panel data for blockchain-based companies listed on stock exchanges in China (Shanghai, Shenzhen and Hong Kong) between 2014 and 2018. The operational efficiency of firms that deploy blockchain technology is evaluated using ordinary least squares and system generalized method of moments estimation.FindingsResults suggest that companies’ current year performance exceeds the previous year performance because of blockchain deployment in firms’ operations. Firms with higher financial leverage and return on assets reap more benefits from blockchain. Larger and older firms benefit less from blockchain implementation. Stochastic frontier estimation suggests that, on average, firms attain a 57.76 per cent technical efficiency level, or, put differently, they operate 42.24 per cent below their maximum level of potential output.Originality/valueBlockchain can benefit firms in terms of consensus, security and trust, spurring the evolution of a new form of organizational dynamics. This study explores the theory of transactional cost analysis under blockchain technology. In addition, this study hypothesizes and empirically demonstrates the significant impacts of blockchain technology on corporations’ operational efficiency, using audited, externally reported financial data. Industry professionals can reap benefits from this research by noticing the magnitude of changes in firms’ financial parameters attributable to blockchain adoption.

Proof of Work as a Three-Sided Market

Blockchain technology is the distributed, decentralised ledger technology underlying Bitcoin and other cryptocurrencies. We apply Oliver Williamson’s transactions cost analysis to the blockchain consensus mechanism. Blockchains reduce the costs of opportunism but are not ‘trustless’. We show that blockchains are trust machines. Blockchains are platforms for three-sided bargaining that convert energy-intensive computation into economically-valuable trust.

A Comparative Study of Antecedents to Contracting Practice in Buyer-Seller Relationships in Egypt and China

The purpose of this study is to analyze the influences of transaction factors on inter-firms relationships in different businesses. The study focuses on the comparison between the Chinese and Egyptian business with regarding to buyer and seller relationships in textile industry in order to find out the differences in buyer-seller relationships between Egypt and China and how the cultural factors influence the contracting practice between these two countries. Therefore, transaction cost analysis (TCA), relational contracting theory (RCT) and resource dependence theory (RDT) would act as the important tools to find out how the business relationship works in different culture background. Combining the three theories, we can conclude the general view about the transaction mechanism in the two countries. Chinese market situation, weak legal system and informal institutions combining with the “guanxi” embedded business environment make the Chinese small firms rely on the relational contracting more than formal contracting. Meanwhile, the high value for law makes Egyptians prefer to formal contracting. The findings highlight the fact that the level of contracting mechanism was found to be more positive in Egypt than in China and was statistically significant. In other words, the Egyptians tend to use the formal transactional mechanisms which emphasize legal conditions and incentive systems, whereas the Chinese prefer the relational mechanisms that govern exchanges through moral control and trust in the relationships between the buyers and suppliers. A hierarchical multiple regression approach employing the OLS regression model was carried out and the findings show that almost 30% of contracting mechanisms can be explained by the model, while the remaining percentage (70%) can be explained by other factors not included in the research model. In addition, the findings revealed that the association between supplier specific investments and contracting becomes significantly more enforced in Egypt than in China when the size of the buying firm increases. Furthermore, contracts have a control effect on buyer-supplier relationships in case of unanticipated eventualities.

Fair payments for verifiable cloud services using smart contracts

With the advent of cloud computing, outsourcing a computation has become a common practice. A client, to have greater confidence in computations performed by the cloud, should be able to verify the correctness of the results returned. Two approaches are followed to verify the correctness of the results: (1) Proof-based verifiable computing and (2) Replication-based Verifiable Computing. The first approach uses cryptography techniques, whereas the second approach follows game-theoretic methods. Although both approaches are almost perfect solutions to verify the results, they do not discuss fairness in verifiable computing.In this paper, we consider the problem of fairness in verifiable cloud computing, which means that the cloud gets the payment from a client for an outsourced computation if and only if the client receives the correct output of the computation. Most of the existing solutions rely on a trusted third-party to realise fairness. Motivated by the recent advances in blockchain technology and smart contracts, we propose protocols for different verifiable computing techniques using smart contracts. We first present a smart-contract based solution for fair proof-based verifiable computation and show that the overhead of using smart-contract is almost negligible when both client and cloud are honest. Then we show two different solutions depending upon the number of clouds hired to achieve fairness in replication-based verifiable computing. We have designed our protocols in the Blockchain model of cryptography and proved their security under universally composable theory. We also show the financial and transactional cost analysis of proposed contracts by implementing them in solidity and running them on Ethereum Blockchain.