Transaction Cost Economics

This article concerns the extent to which corrupt behavior is dependent on the organizational power structure and the resources available for illegal exchange. This qualitative study is based on 42 in-depth interviews with organizational actors in different organizations in Hungary. Four core themes emerged from the analysis of the interviews: (a) isolated corruption at the bottom, (b) the middle level’s own corruption, (c) “technicization” when middle-level professionals and expert groups are used to legalize the corruption of the dominant coalition, and (d) “turning-off controls” when organizational elites intentionally deactivate internal and external controls to avoid detection.

"Corruption has become one of the most popular topics in the social scientific disciplines. However, there is a lack of interdisciplinary communication about corruption. Models developed by different
academic disciplines are often isolated from each other. The purpose of this paper is to review several major approaches to corruption and draw them closer to each other. Most studies of corruption fall
into three major categories: (i) rational-actor models where corruption is viewed as resulting from cost/benefit analysis of individual actors; (ii) structural models that focus on external forces that determine corruption; and (iii) relational models that emphasize social interactions and networks among corrupt actors. Focusing on actors’ behavior and the social context, this article explains corruption concepts taken from sociology, economics, organization studies, political science, social anthropology, and social psychology."

Communication structures between project owners and project managers are influenced by the principal–agent relationship between the parties and the contract type chosen. Empirical research results on project owner–manager communication practices are mapped against the contractual communication requirements in projects. This identifies possible risk factors for projects, based on a conflict between ‘best’ communication for a project and suggested communication through the chosen contract type. The paper provides recommendations for risk-minimizing owner–manager communication, as well as contributions to project theory by showing the differences of principal–agent theory and transaction costs economics in minimizing costs for governing projects.

Purpose: To investigate why developing country suppliers are adopting socially sustainable practices and how the implementation process is both impeded and enabled.

Design/methodology/approach: A multi-case study approach is adopted based on four Ready Made Garment (RMG) industry suppliers in Bangladesh and the Bangladeshi buying houses of two large UK retailers. The primary mode of data collection is exploratory face-to-face interviews with 14 senior representatives. Findings are later interpreted using the Transaction Cost Economics (TCE) theory lens.

Findings: One factor motivating implementation is labour retention – a skilled labour shortage means employees will migrate to other factories if suppliers do not improve certain social standards. Barriers to implementation include a misalignment between the requirements of Western codes of conduct and the cultural and socio-economic context in Bangladesh. Enablers include a shift from auditing and monitoring to more open dialogue and trust between buyers and suppliers. We also reveal evidence of mock compliance, e.g. suppliers keeping two sets of timesheets, and of the complexities of social sustainability. For example, while some initiatives are unanimously positive, removing child labour from RMG industry suppliers has simply diverted it to other, less regulated and more hazardous industries like construction.

Research implications: An early, exploratory contribution is provided. The work could be extended, e.g. to other stakeholders like third-party auditors and Non-Governmental Organisations (NGOs).

Practical implications: Being aware of the motivations, barriers and enablers will help Multi-National Corporations (MNCs) promote good practice and anticipate the challenges they are likely to face in improving the social sustainability of their supply chains. Use of TCE leads to suggesting MNCs need to move beyond immediate suppliers and incorporate tier-two suppliers in their implementation efforts.

Social implications: Social sustainability improvements should benefit vulnerable workers, help suppliers develop longer term relationships with MNCs, and contribute to economic growth.

Originality/value: Most prior studies have been in the context of developed countries and focused on the perspective of the buying firm only.

Keywords: Social Sustainability; Developing Country Suppliers; Ready Made Garments Industry; Bangladesh; Exploratory Case Study; Transaction Cost Economics.

Article Classification: Research Paper

Volatility and ambiguity are generally thought to create exchange situations more conducive towards opportunism. We examine the effectiveness of contractual and relational governance in constraining opportunism under volatility and ambiguity. We hypothesize that
relational contracts will be robust to volatility but not ambiguity, whereas formal contracts will be robust to ambiguity but not volatility. The hypotheses are supported using data from 125 interorganizational relationships involving R&D for new product development. Our findings
suggest that formal and relational contracts each may have advantages and disadvantages relative to the other in specific situations, so that they are not simply substitutes. The results have important implications for transaction cost and relational contracting theory, and challenge the
view that relational contracts are not so susceptible to opportunism. A revised comparative governance schema is theorized for future research.

A theoretical framework to understand the adversarial relationship between stakeholders in Malaysian construction industry is proposed. It applies the non-cooperative Game Theory (GT) and Transaction Cost Economic Theory (TCE) to traditional procurement. Both theories give insights into the heart of the industry’s problem – opportunism in the nature of the relationship among stakeholders especially between client and contractor. There can be a Prisoner’s Dilemma situation at the core of the client-contractor relationship, which may be the cause of project inefficiency. This is echoed by the assumption in TCE literature that there are limitations to stakeholder’s rationality – bounded rationality, due to the incapacity to process information without error. Such a situation gives rise to opportunism as they need to protect themselves from possible loss. The attitudes of the contracting parties and the cooperative relationships among the project stakeholders are important to alleviate opportunism for successful project delivery. GT that emphasises the importance of future relationship as pre-condition for cooperative behaviours and Relational Contracting (RC) principles found in TCE may serve as a useful strategy towards fostering cooperative relationship and better teamwork within the construction industry. Therefore, a relationship-based procurement arrangement such as strategic partnering will improve project performance. Since the data collection is still ongoing, the discussion and analysis reported were based on the literature review and pilot survey carried out. The findings should provide a strong foundation for further research towards the development of an effective relationship-based procurement model in Malaysia.

Abstract. This article analyses problems and solutions in the governance of knowledge exchange and joint knowledge production. The analysis is based on a theory which combines elements of transaction cost economics, social exchange theory and theory of knowledge. The ...

Inter-organizational collaboration plays a crucial role in the innovative capacity and competitiveness of
firms. This article discusses the collaboration practices in localized spaces of collaboration through a
study of different coworking spaces in Barcelona, following an inductive and qualitative approach.
Three types of collaboration approaches are identified: 1) cost-related collaboration, where agents are
motivated in reducing their operational costs and the transaction costs related to collaboration; 2)
resource-based collaboration, where agents collaborate to learn or complement their resources by
integrating external resources and sources of knowledge; and 3) relational collaboration, where actors
engage in intense synergistic collaborative practices. The results show that each coworking space tends
to focus on one kind of collaboration type that is influenced in different ways by the coworking space
managers, The article contributes to the research on inter-organizational collaboration by explaining
how the physical environment and the action of the space and community managers can facilitate the
implementation of different collaborative practices among colocated economic agents.

This study attempts to examine the usefulness of the theory of transaction cost economics (TCE) for the online travel market and investigate customer satisfaction and loyalty with the transaction cost over the Internet taken into account. Using Structural equation modeling (SEM), this study identifies the relationships among the antecedents (i.e., uncertainty, personal security and buying frequency), the mediating variable (i.e., transaction costs), and endogenous constructs (i.e., customer satisfaction and loyalty). The findings of this study suggest that satisfaction and loyalty of customers purchasing travel products over the Internet are negatively affected by transaction costs, which is determined by uncertainty, personal security and buying frequency. Moreover, a significantly negative relationship is identified between buying frequency and customer satisfaction.

Are corporations merely composites of individuals, which then take on the rights and duties of individuals, or are they concessions from a sovereign government and therefore subject to popular control? The latter view in this perennial debate has been particularly influential to those who see the idea of corporate personhood as fundamentally anti-democratic and destructive. While sympathetic to the goals of these critics, this paper aims to show that “corporate personality” is not, in itself, a dangerous or malignant concept. I attempt to revive a long-dormant view of corporations that says they are real entities that depend upon the actions of both individuals and states but are reducible to neither. I argue that this realness is grounded in the specific sorts of relationships that corporations are functionally dependent upon. This relational approach to corporate personality helps us understand how normative and critical political theory should approach the corporation.

Group Savings and Loan Associations' (GSLAs) in Nyanza and Western provinces are having a vital impact on the ability of members to manage their savings, access loans and by extension take greater control of their livelihoods and futures. GSLAs in Kenya are serving a segment that is mostly outside the formal financial sector; a segment that values the groups advice as well as services. Over time, groups are also expanding the market for sound institutional governance.

La Coordinación del Área de Teoría Económica, del Departamento de Economía, en la Universidad Eafit, se complace en presentar a toda la comunidad universitaria esta publicación, resultado de un esfuerzo iniciado en el año 2006, para dar a conocer los trabajos y las investigaciones que vienen desarrollando los profesores en el área de la teoría y el pensamiento económico. Esta idea tiene su génesis en la apertura de un espacio académico formal y permanente, bautizado como la Cátedra Abierta de Teoría Económica, desarrollada cada semestre, donde se convoca a docentes y estudiantes de la Universidad, a participar en ella.
En esta primera publicación presentamos el resultado de la Cátedra, realizada en los semestres 01 y 02 de 2006, son en total cinco ponencias: Distribución económica: una mirada desde la justicia dinámica; Historiografía de la teoría neoclásica de la demanda; Una visión general de la escuela austriaca; Los costos de transacción: un hallazgo no tan reciente. Aproximación a la teoría de los costos de circulación de Karl Marx; La solidaridad como un factor de producción desde la teoría económica comprensiva.
Esperamos que este documento se convierta en fuente de consulta autorizada para los profesores y los estudiantes, no solo del área de teoría económica, sino para todos los interesados en estos temas.

The Blockchain has evoked the interest of practitioners and academics alike. Frequently only being perceived as the underlying technology of cryptocurrencies such as Bitcoin, various innovative applications have highlighted its potential to disrupt, revolutionize, and restructure many industries, including the whole supply chain (SC) and logistics sector. Although major industry players are already investing huge amounts of money to build, test, and deploy disruptive solutions that bear the potential to substantially transform existing supply chains, there remains a dearth of literature in leading academic journals which closely investigates the Blockchain and uses theory to analyze, explain, and predict current as well as future developments. This conceptual paper strives to close this research gap and presents a framework that is built on four established economic theories (principal agent theory, transaction cost analysis, resource-based view, network theory) that can be used to derive relevant theory-based research questions. Additionally, the functionality of the Blockchain is briefly explained and some use cases are presented. This paper is intended to initiate and stimulate academic discussion on the potential impact of the Blockchain and introduces a framework for middle-range theorizing together with several potential research questions.