Transaction Cost Savings Research Articles

Blockchain Technology in International Trade: A Catalyst for Efficiency and Revenue Generation

Background and Aim: The advent of blockchain technology has brought about a significant transformation in the realms of finance and international trade, primarily through the implementation of a decentralized ledger system for conducting transactions. The present study aims to assess the efficacy and economic advantages of employing blockchain technology in the context of international trade financing. Specifically, it focuses on the potential decrease in transaction time and cost savings that Chinese domestic banks may experience as a result of adopting this technology. Materials and Methods: This research employs a quantitative methodology to assess the efficacy of blockchain technology in the context of international trade, with a specific emphasis on banking professionals. The study utilizes a cost-benefit analysis approach to maximize advantages and minimize drawbacks. Results: The research revealed that the implementation of blockchain technology has the potential to improve operational efficiency and mitigate transaction risks. However, it is important to note that this comes at the expense of increased costs, rendering it unsuitable for widespread adoption due to its unfavorable net benefit. Conclusion: The findings of the study indicate that the use of blockchain technology leads to enhanced operational efficiency and decreased transactional risks. However, it is important to note that this implementation also entails elevated costs, rendering it impractical for widespread adoption due to its unfavorable net benefit. The report posits that the advantages of operational efficiency offered by blockchain technology are overshadowed by the accompanying expenses, thereby advocating for a prudent approach to its implementation in the realm of international trade. The recommendations encompass many strategies such as the implementation of trial projects, conducting thorough cost-benefit analyses, using hybrid techniques, ensuring ongoing monitoring, and maintaining strict adherence to legal regulations.

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 role of renewable energy alliances in enhancing corporate innovation: Evidence from China

The increasing importance of innovation-driven development requires empowering enterprises as the main drivers of innovation in emerging energy technologies. The existing literature primarily emphasizes government support for renewable innovation, with limited research on external collaborations. This paper searches and collects announcements of listed renewable energy companies regarding strategic alliances during 2009–2021 to explore whether renewable energy alliances promote innovation and their mechanism to motivate innovation efforts, using the Two-way Fixed Effects Model. The main results suggest that renewable energy alliances increase innovation output significantly. The mechanism analysis reveals that establishing renewable energy alliances indirectly enhances innovation output via transaction cost savings and alleviates financing constraints. The heterogeneity analysis indicates that factors such as firm ownership, size, knowledge absorption capacity, green investor concerns, and enterprise life cycle significantly impact the innovation incentives from renewable energy alliances. This paper enriches the research on the drivers of renewable energy innovation and provides policy insights for encouraging autonomous innovation in renewable energy enterprises.

The 4.0 revolution in meat industries and the impacts on transaction cost savings

The article brings a reflection on what is happening in industry 4.0, in the agribusiness environment, more specifically in the meat processing industries, and the relationship of these movements with transaction cost savings, which occur within the food chain, between suppliers, producers, distributors, customers, among others.

Nature of the monopoly of information and communication platforms

Methods. The theoretical and methodological basis of the study is the theory of sectoral markets as a separate branch of microeconomic theory that explains the principles of functioning of market structures. Starting from the neoclassical concept of monopoly and supplementing it with institutional, behavioral and other parameters, the author conducts a comparative analysis of economic and natural monopoly with a new phenomenon in market organization – the monopoly of information and communication platforms, and on this basis determines the its nature. Results. The article theoretically substantiates the sources of monopoly of information and communication platforms, including the high level of market concentration, low elasticity of demand, and barriers to entry that are typical for traditional economic monopolies, and the economies of scale, subadditivity of costs and control over the key resource in the industry that are inherent in natural monopolies, as well as network effects, transaction cost savings and control over large databases that are unique to the monopoly of information and communication platforms. The author describes the typical behavioral strategies that follow from them: the formation of «bottlenecks» in the channels of goods movement and the exploitation of the lock-in effect, vertical integration and leverage of market power, personalization, exclusive dealership, etc. The specifics of their implementation for transactional and non-transactional platforms are determined. The role of the key resource operator in the digital ecosystem is determined. Novelty of the study presented in the article lies in the systematization of the sources of market power that determine the formation of the monopoly of information and communication platforms, and in the identification of unique ones among them and those which are typical for other types of monopoly. The author substantiates the role of network effects, transaction costs and big data control in consolidating the monopoly position of information and communication platforms in the «bottlenecks» of the commodity circulation chains. Practical value. The results of the study form the theoretical basis for the state regulation of the monopoly of information and communication platforms.

Smart contract applications in tourism

Based on blockchain technology, smart contracts promise to revolutionize the way parties legally agree. Smart contracts could enable tourism service providers to trade directly with customers bypassing some intermediaries. The study aims at identifying the provided services, economic impact, partners, popularity, technical and technological factors of smart contract applications in various tourism areas. It investigates ten popular smart contract applications that cover a wide spectrum of tourism areas such as hotel reservations, airline tickets, car rentals, payment management, reward programmes, traveller identity, luggage tracking, validity of reviews and ratings and more. These applications are analysed with respect to their purpose, business model, economic impact, partners, provided services, popularity, as well as what cryptocurrency and blockchain they use. Smart contracts enable time and transaction cost savings, convenience, flexibility, security, trust, ease verification of personal data and more. Most applications gained popularity mainly during 2018–19. Almost every application uses a different cryptocurrency. Ethereum is the most popular platform followed by Hyperledger Fabric and Stellar. The development of a universal legislation as well as interoperability is a necessity for the wide adoption of smart contracts.

The economic value of the extracted elements from brine concentrates of Spanish desalination plants

The disposal of desalination brine, which contains a higher concentration of salts, is treated as waste and discharged into the environment. In this brine, several elements, when processing and extraction were possible, could be susceptible to exploitation and valorisation. Among all the ions existing in desalination brine, and whose industrial use is possible, sodium (Na), magnesium (Mg), calcium (Ca) and boron (B) are found at high concentrations; there are also other elements, not as abundant as previous, but highly demanded in the current industry, such as lithium (Li), rubidium (Rb), strontium (Sr) or gallium (Ga). These elements, as well as other alkaline metals, have taken on considerable prominence today due to their technological applications. Analysing the prices and quotations of these elements in the international markets for raw materials, it is possible to determine the economic potential of this mining activity of desalination plants in Spain. The economic value of the extracted elements also incorporates other additional advantages, which focus on the elimination, or reduction, of brine discharges, the savings in transportation and transaction costs of raw materials, in addition to the considerable reduction in environmental impacts caused by traditional mining.

Some Efficiency Aspects of Monopolistic Competition: Innovation, Variety and Transaction Costs

We stress some efficiency aspects of monopolistic competition justifying it on account of its tendency to innovate and the questionable excess capacity paradigm. Some further efficiency aspects revealed are product variety and transaction cost savings. We view the monopolistically competitive firm as an essential source of technological innovation, product variety and cost economies. While perfect competition is universally considered a benchmark and a social optimum, we consider it a strongly unrealistic theoretical setup where the monopolistically, rather than the perfectly, competitive firm turns out to be the true type of competition and social optimum in the real world of positive transaction costs. The monopolistically competitive firm not only offers product variety and innovation but is the optimal institutional arrangement under positive transaction costs.

Governance of international franchise networks: Combining value creation and value appropriation perspectives

This study develops a new perspective on the franchisor’s choice of international governance modes as a value creation and value appropriation mechanism. Value creation refers to knowledge creation from the joint use of the franchisor’s intangible system-specific knowhow and foreign partners’ intangible local market knowhow; value appropriation refers to efficient knowledge exploitation based on transaction cost savings under conditions of uncertainty and transaction-specific investments. Based on primary data from 162 international franchise systems headquartered in eight countries, the results highlight the importance of intangible knowledge-based resources (franchisor’s system-specific knowhow and franchise partners’ local market knowhow) and transaction cost factors (transaction-specific investments, environmental uncertainty, and cultural uncertainty) for the franchisor’s choice between equity modes, such as wholly-owned subsidiaries, and joint venture franchising, and non-equity modes, such as single-unit franchising, area development franchising, and master franchising.

Evolution of Portuguese community forests and their governance based on new institutional economics

Forest governance is under reorganisation in many European countries, because of the changes in property and forest tenure rights. Portuguese community-based forestry is an interesting research subject from a New Institutional Economics perspective. Community forests (an important part of community lands known as baldios) cover half a million hectares in the north and the centre of the country and are owned by local communities. Their average size of over 400 hectares and diversity of resources underscore their value, and their management contributes to rural development. Recent laws intend for the complete transfer of their tenure rights to communities and local authorities. In this study, we analysed the transformational processes of Portuguese community-based forestry. To structure this analysis and shed light on forest management-related problems, we followed the 'four-level institutional analysis' developed by Williamson. Particular attention was paid to the first three levels. The first concerned social practice and informal rules. We are describing the history of baldios, their use by rural populations, and the subsequent occupation by the State for afforestation. The second level addressed the institutional environment and formal rules. Here, we focused on the recognition of baldio community properties and their legal framework development. The third level addressed management and the interaction of actors in transaction cost savings. Here, we examined the current community-based management models and future trends. In our analysis, we identified the causes underlying baldio management problems at different levels, which highlight the importance of new governance models and economic activities. The analysis showed that overall, the Portuguese community forest governance is a flexible structure capable of adapting to political and demographic changes and offering valuable support for the development of rural areas in the north and centre of the country. Additional empirical research is needed to improve knowledge on the impact of institutions on the management of community forests, both nationally and internationally.

Will Transaction Costs and Economies of Scale Tip the Balance in Farm Size in Industrial Agriculture? An Illustration for Non-Food Biomass Production in Germany

The study investigates how the agricultural sector can respond to a growing non-food biomass demand. Taking Germany as an example, a stylized case of biomass production under conditions of technological advance and constantly growing demand is modelled. It is argued that biomass producers might seek to adjust their farm size by simultaneously optimizing benefits from the production scale and transaction cost savings, where transaction costs are measured using Data Envelopment Analysis. The results extend the debate on transaction costs and structural change in agriculture by revealing a possible synergy and trade-off between transaction cost savings and benefits from (dis)economies of scale. They show that if larger farms cannot economize on transaction costs, then investments in land and labor, needed to adjust to higher biomass demand, partly compromise the returns to scale, which decelerates the farm size growth. A higher degree of asset specificity gives rise to transaction costs and reduces the rate at which the farm size decreases. Smaller producers may disproportionally benefit from their higher potential of transaction cost savings, if advanced technologies can offset the scale advantage of larger farms. The findings inform policymakers to consider this complex effect when comparing the opportunities of smaller and larger agricultural producers in the bioeconomy.

Logistics 4.0: The Cooperative Strategy and Reducing Costs

The strategic position of each company does not depend exclusively on the quantity and quality of the resources it has, but on the position, it occupies within the network in which it operates. Networking helps reduce transaction costs and business coordination: Valuable information about customers, suppliers, competitors, and good partners is easily shared among network stakeholders, resulting in savings in transaction costs. There may be high transaction costs when there are two different stages of property ownership, and the 4th industrial revolution seeks to challenge the logistical areas for technological digitization and large domain integration and seeks to present a new operational, organizational, and managerial paradigm that will be termed: logistics 4.0. Methodologically, the research is based on a bibliographical review and seeks to find grounds that theoretically justify the reduction of Transaction Costs through Logistics 4.0. Information speed is a major influencer of good results, and improvements in the transmission of information and knowledge seek to improve the management of organizations through their networks and aims to reduce their transaction costs from the new technological and logistical revolutions. Logistics 4.0 is based on intelligence and technological equipment and is developed with online tools, seeking to respond to faster, virtual and automatic information systems.

Legal Change and Water Market Transaction Costs in Colorado

AbstractWater markets are commonly described as failing to achieve efficient water management because of transaction cost barriers to trade. In the western United States, two sources of legal conflict frequently drive transaction costs: (1) negative externalities of trading and (2) uncertain property rights. Conflicts arise because water law applies a no‐injury rule that prevents water transfers from modifying water available to third‐party water rights and defines water rights by historical water use, among other reasons. Existing literature suggests many legal changes to reduce transaction costs, but no studies in the western United States quantify transaction costs under proposed future changes. Here we developed statistical models of transaction costs for water transfer proponents under four specific legal changes in the state of Colorado. Two legal changes would modify the no‐injury rule, and two aim to clarify property rights. Colorado hosts active markets and has recently experienced debate over such legal changes. By surveying 100 legal and hydrologic experts, we elicited transaction cost estimates and rankings of which legal changes were most likely to increase third‐party injury. The legal changes that aim to clarify property rights had significantly lower likelihoods of increasing injury. One of these legal changes, which would not limit transferable water to historical use in certain circumstances, also had the greatest reductions in proponents' transaction costs. Meanwhile, the legal changes that directly modify the no‐injury rule project substantial transaction cost savings but much higher likelihoods of increased injury. The results demonstrate trade‐offs between reducing transaction costs and increasing third‐party effects.

Empirical Studies of Patent Pools

This book chapter from the forthcoming Research Handbook on the Economics of Intellectual Property Law provides an overview of the legal and economic impact of patent pools, with a special focus on the methods scholars have used to study these institutions empirically. Patent pools are privately governed institutions that license complementary patent rights under unified agreements. Licensees of the aggregated rights typically include members of the pool (i.e., licensors), and technology manufacturers, service providers, or researchers who are not members (sometimes referred to herein as “pure licensees”). The discussion is divided into five parts: first, sources that helped develop the historical record of patent pools; second, methods scholars have used to assess the impact of patent pools on competition and innovation; third, works that explore the relationship between patent pooling and litigation; fourth, new methods used to estimate the transaction cost savings of patent pools; and fifth, works that examine whether patent pools are useful forums for patent valuation. Because the present volume is focused on analytical methods used within empirical studies, economic and legal scholarship concerning pools that is not primarily empirical in nature (e.g., theoretical work) is discussed only to help explain the motivation for, or conclusions of, empirical studies.

The Economic Impacts of Open Science: A Rapid Evidence Assessment

A common motivation for increasing open access to research findings and data is the potential to create economic benefits—but evidence is patchy and diverse. This study systematically reviewed the evidence on what kinds of economic impacts (positive and negative) open science can have, how these comes about, and how benefits could be maximized. Use of open science outputs often leaves no obvious trace, so most evidence of impacts is based on interviews, surveys, inference based on existing costs, and modelling approaches. There is indicative evidence that open access to findings/data can lead to savings in access costs, labour costs and transaction costs. There are examples of open science enabling new products, services, companies, research and collaborations. Modelling studies suggest higher returns to R&D if open access permits greater accessibility and efficiency of use of findings. Barriers include lack of skills capacity in search, interpretation and text mining, and lack of clarity around where benefits accrue. There are also contextual considerations around who benefits most from open science (e.g., sectors, small vs. larger companies, types of dataset). Recommendations captured in the review include more research, monitoring and evaluation (including developing metrics), promoting benefits, capacity building and making outputs more audience-friendly.

Theoretical and methodological solutions for the cluster policy development

Creating clusters has a positive effect on the functioning of both the internal structures of the cluster and the economies of the regions and industries where they are located (savings in transaction costs, optimization of the technological chain of product passage, rationalization of the management system, etc.). At the same time, in the course of the research, the most inherent characteristics of clusters were singled out, the scheme was constructed and the brief interpretation was given. It has been established that the main and integral components of any cluster are: 1) cooperation and integration; 2) territorial or sectoral location; 3) the optimal set of participants; 4) specialization, rational division of labor and complementarity; 5) synergistic effect; 6) innovation and investment; 7) cluster life cycle. To concretize the above, characteristic signs of cluster development or different stages of the life cycle are formulated: Stage I – the existing set of enterprises and organizations, called agglomeration; Stage II – the resulting cluster; Stage III – becoming a cluster; Stage IV – completed cluster; Stage V – rebuilt cluster.

An Emerging Political Economy of the BlockChain: Enhancing Regulatory Opportunities

Blockchains are inherently secure, encrypted technologies, enabling electronic transaction processing, communications, authentication, and recordkeeping. Blockchain circumvents traditional (banking) systems, promising transaction cost savings and speculative profits. Blockchain is an open, encrypted and distributed ledger system underlying crypto-currencies (BitCoin) and initial coin offerings (ICO). Both masquerade as media of exchange. Future blockchain applications include supply chains, identity management and healthcare information exchange. Blockchains’ technical complexity obscure comprehension by many legislators, regulators, lawyers and judges. Libertarian technologists cheer these barriers to regulation. This paper explores blockchain operations, reviews evolving cryptocurrency policies, and proposes regulatory approaches, urging expanded jurisdiction over blockchain bubbles.

Patent Pool Outsiders

Individuals who decline to join cooperative groups — outsiders — raise concerns in many areas of law and policy. From trade policy to climate agreements to class action procedures, the fundamental concern is the same: a single member of the group who drops out could weaken the remaining union. This Article analyzes the outsider problem as it affects patents. The outsider question has important bearing on patent and antitrust policy. By centralizing and simplifying complex patent licensing deals, patent pools conserve tremendous transaction costs. This allows for the widespread production and competitive sale of many useful technologies, particularly in the consumer electronics industry. Because these transaction cost savings appear to outweigh the most common competition-related concerns patent pools raise, antitrust authorities generally view these private pools favorably. Others are less sanguine. Most patent pools are incomplete: for the technologies they cover, not all relevant patents are included. The reason for this is understandable: patent holders sometimes believe they can negotiate for higher royalties by declining to join an existing pool. Antitrust regulators are aware of this behavior, but do not worry much about it. A growing number of economists and legal scholars believe, however, that this outsider behavior may impose higher costs on pool licensees, detracting from the central benefit that patent pools offer — transaction cost savings. These commentators urge antitrust regulators to regard patent pools with greater caution and skepticism. These calls for caution, however, are based mostly on theories about how patent pools should work, rather than empirical study. Remarkably, little research has been done to shed light on the actual impact of patent pool outsiders. Through an original ethnographic study, this Article seeks to remedy this gap. A set of the most notable and public episodes of outsider behavior were collected from industry press reports, case reports, and historical archives. Crucial new information was then gathered through interviews with lawyers and executives directly involved with the episodes studied. The study reveals a characteristic of patent pools that has gone unappreciated until now: they subtly but powerfully influence bargains that take place “poolside” — i.e., deals between patent holders and licensees that take place “in the shadow” of the pool. This spill-over effect can beneficially limit the power that theorists have assumed outsiders to have. This is an unappreciated benefit of cooperation. The theorists, as it turns out, have not used the wrong approach, but rather, have been missing some important parameters. To further aid regulators, this Article builds upon its qualitative findings by introducing a new quantitative technique for estimating the cost that a licensee either incurs or saves due to an outsider. Applying this technique to original financial and industry data gathered from research subjects, this Article shows that, counterintuitively, patent licensees are sometimes better-off where cooperation among licensors is partial, rather than complete. The inflection point lies where the royalty rate hike that a unified pool would need to charge to draw in an outsider is equal to the transaction costs that licensees would conserve by dealing with a single pool. This study’s revelations have provocative implications that reach beyond patent law. Contrary to conventional wisdom, slightly fragmented property markets may sometimes be preferable to “grand coalitions.” There may exist in any given market for complementary patent rights (or other complementary property rights), an optimal level of diffusion of ownership that resides between total diffusion and total concentration. Some cooperation may not only be better than none, but also better than more. Drawing upon this study, antitrust regulators who must evaluate patent pools can assemble a clearer and more complete understanding of their overall costs and benefits — a topic that Robert Merges and I recently wrote on in a related article. This Article is also helpful beyond patent law. The ethnographic methodology followed here reveals dynamics between outsiders and groups that theory alone has not captured. Scholars concerned with outsiders in other areas of law and policy can refine and build upon theory by applying a similar ethnographic approach.

Procedural and Substantive Review of Related Party Transactions (RPTs): The Case for Non-Controlling Shareholder-Dependent (NCS-Dependent) Directors

In publicly traded companies, related party transactions (RPTs) are an obvious vehicle for shareholder expropriation. However, they may also be efficient, particularly when they are motivated by transaction cost savings. This paper aims to identify which type of RPT review is not only effective (i.e. stops value-decreasing transactions) but also efficient (i.e. allows value-increasing transactions occur). The paper argues that there is a trade-off between these two goals (effectiveness and efficiency), and that the optimal solution is company-specific. The review of RPTs can be based on substantive or procedural fairness. Ex-post review of substantive fairness by sophisticated courts, or the credible threat thereof, can be effective in policing RPTs, as in the U.S. However, such a review may overdeter efficient RPTs because these may look unfair in hindsight, when compared with arm’s length transactions. When courts review procedural fairness, the assessment is delegated to market professionals (shareholders or directors) who review the transaction ex-ante and have, in principle, good incentives to approve it only if it is efficient. However, this screen becomes ineffective if the reviewers are not well-informed or not independent. Moreover, a regime that tries to cope with this issue by empowering non-controlling shareholders in general, as in the UK, creates another problem: activist shareholders could more easily intervene with the controller’s strategy, which may be inefficient for the particular company. This paper recommends a different procedural standard as the default regime. RPTs should be considered fair when they are approved by non-controlling shareholderdependent (NCS-dependent) directors. Non-controlling shareholders should have the exclusive right to nominate, appoint and remove these directors. NCS-dependent directors should account for a minority of the board and their mandate should be limited to screening related-party transactions. This regime would be as effective as those of the U.S. and the UK, and arguably more efficient. Companies that can organize themselves efficiently without RPTs may opt out of this regime, for instance by choosing a substantive court review or a broader mandate for NCS-dependent directors to advise on strategy issues.

The choice of contract duration in franchising networks: A transaction cost and resource-based view

Contract duration as component of contract design has both a transaction cost savings function by mitigating exchange hazards and a strategic value creation function by leveraging knowledge-based resources. Previous studies have not explained the value creation function of contract duration in franchising. This study addresses this research gap. Specifically, we complement the transaction cost model of contract duration by developing resource-based hypotheses to explain the knowledge leverage function of contract duration. Using resource-based theory, we expect that intangible knowledge-based resources, such as system-specific knowhow and brand name of the franchisor, will positively influence franchise contract duration. This study contributes to the franchise and contract literature by highlighting that contract duration has – in addition to the safeguarding function - an important knowledge leverage function. Data from the German franchise sector provides support for the hypotheses.