This qualitative study looks at the complex relationship of transaction costs, norms, and social networks through a comparison of industrial buyer-seller relationships in the United States and Mexico. Despite arguments by transactioncost theorists that the nature of cooperation in business is largely a function of the nature of investments in transaction assets, this article illustrates several cases where the economic logic is attenuated and a mutual orientation develops as the social structure promotes greater trust either because of (...) shared norms or network ties. It also suggests that asset specificity may at times be a product of the social structure in which the transaction is embedded. The article develops theoretical propositions and suggests directions for future research. (shrink)

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We analyze a financial market à la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a market maker. Traders have to pay a cost in order to trade. We show that, eventually, all informed traders decide not to trade, independently of their private information, i.e., (...) an informational cascade occurs. We replicated our financial market in the laboratory. We found that, in the experiment, informational cascades occur when the theory suggests they should. Nevertheless, the ability of the price to aggregate private information is not significantly affected. (JEL C92, D8, G14). (shrink)

New network technologies are framed as eliminating ‘transaction costs’, a notion first developed in economic theory that now drives the design of market systems. However, the actual promise of the elimination of transaction costs seems unfeasible, because of a cyclical pattern in which network technologies that make that promise create processes of institutionalization that create new forms transaction costs. Nonetheless, the promises legitimize the exemption of innovations of network technologies from critical scrutiny.

Stakeholder scholars have long explored how stakeholder relationships differ from economic transactions. We contribute to this ongoing inquiry by developing a conceptual framework of relationality in stakeholder theory that encompasses a stakeholder-theoretic extension of Williamson's contracting schema and a new typology of stakeholder relationships. Premised on understanding relationality as the need for informal human relationships beyond formal governance, our framework locates the key difference between transaction cost economics and stakeholder theory in their treatment of informal relationships. While transaction (...) cost economics perceives informal relationships to be shaped by formal governance structures and enforced by contractual safeguards, stakeholder theory is open to the possibility that some informal relationships between stakeholders may be genuinely moral and thus irreducible to formal governance and contractual safeguards. These stakeholder relationships may lead to unique economic effects described by instrumental stakeholder theory. The difference that we identified between the two literatures shows how stakeholder theory's embrace of relationality surpasses that of transaction cost economics. (shrink)

In this paper I argue that problems connected to good scientific practice and scientific misconduct can be fruitfully analyzed via the means of transaction costs economics. Thus, transaction costs economics is a valuable tool for the descriptive as well as normative analysis of science. I further argue that current institutional matrices impose high transaction costs on (potential) funding agencies of scientific research. This underlies many cases of bad practice in scientific research. Lowering these (...) class='Hi'>transaction costs would have positive effects both on the adherence of researchers to the rules of good practice as well as for the amount of funding that is spend on research. In the end, I propose an institutional reform that promises to lower these transaction costs based upon an idea of Michael Rosenblatt. (shrink)

As the transaction cost theory of the firm was taking shape in the 1970s, another important movement in economics was emerging: a revival of the ‘Austrian’ tradition in economic theory associated with such economists as Ludwig von Mises and F. A. Hayek . As Oliver Williamson has pointed out, Austrian economics is among the diverse sources for transaction cost economics. In particular, Williamson frequently cites Hayek , particularly Hayek’s emphasis on adaptation as a key problem of economic organisation (...) . Following Williamson’s lead, a reference to Hayek’s ‘The Use of Knowledge in Society’ has become almost mandatory in discussions of economic organisation . However, there are many other potential links between Austrian and transaction cost economics that have not been explored closely and exploited.This article argues that characteristically Austrian ideas about property, entrepreneurship, economic calculation, tacit knowledge, and the temporal structure of capital have important implications for theories of economic organisation, transaction cost economics in particular. Austrian economists have not, however, devoted substantial attention to the theory of the firm, preferring to focus on business-cycle theory, welfare economics, political economy, comparative economic systems, and other areas. Until recently the theory of the firm was an almost completely neglected area in Austrian economics, but over the last decade, a small Austrian literature on the firm has emerged. While these works cover a wide variety of theoretical and applied topics, their authors share the view that Austrian insights have something to offer students of firm organisation. (shrink)

The purpose of the study is to present the author's accounting mechanisms in relation to the transaction costs of a manufacturing enterprise in relation to the financial, managerial and strategic aspects of this process. The scientific novelty of the research lies in the fact that the paper systematizes views on the existing accounting and analytical support in relation to transaction costs, offers various options for constructing accounting, management and strategic accounting of transaction costs, depending (...) on the assessment available for reflection. As a result, the recommended accounting approaches using accounting, management and strategic accounting of transaction costs are presented on the example of an industrial company. Since transaction costs occupy a significant share in the cost structure of business units engaged in production, it is necessary to organize their reflection using modern accounting principles. The complexity of the monetary assessment of such costs causes the complexity of the management process associated with their accounting. This publication is devoted to the problems of accounting, management and strategic accounting of transaction costs at a manufacturing enterprise. The use of an integrated approach based on accounting principles makes it possible to ensure control over transaction costs for solving urgent tasks of management and owners. (shrink)

We argue that although halal certification could potentially reduce the high transaction costs related to buying Islamic financial products, in practice these costs are just replaced by transaction costs relating to the certification itself. It takes considerable time (2–3 months) and money (USD 122.000) to obtain a halal certification. Partially, this is because the market is highly concentrated and non-contestable. About 20 individual Sharia scholars control more than half the market, with the top 3 earning (...) an estimated USD 4.5 million in fees per year. Moreover, this market seems plagued with problems, most notably a strong incentive for excessively lenient certification, lack of consensus on what is considered halal and sub-standard governance practices. We discuss solutions to these problems and conclude that a neutral non-profit government entity should assume the role of halal certifiers. (shrink)

This article provides an ISCT analysis of commercial bribery focused on transaction cost economics. In the language of Antitrust, commercial bribery is a form of vertical arrangement subject to the same efficiency analysis that has found other vertical arrangements potentially beneficial to consumers. My analysis shows that actions condemned as commerical bribery in the Honda case may well have benefited Honda's dealer network once promotional free riding and other forms of rent seeking by dealers are considered. I propose that (...) the term "commercial bribery" should be avoided until after an ISCT analysis shows that the community is likely to have been harmed. The term "third-party payments" is a more ethically neutral term with which to begin the analysis. (shrink)

This paper outlines different types of knowledge and how they are applied to different problem types. It makes the case that co-created knowledge, generated by innovative and collaborative partnerships of scholars within a transdisciplinary framework is best suited to address the most complex and therefore most important problems in food systems scholarship. It applies Transaction Costs theory to highlight some of the options we scholars face and applies these concepts to the issue of Payments for Ecosystems Services., with (...) an analogy and questions to ponder. (shrink)

This book examines transaction cost economics, the influential theoretical perspective on organizations and industry that was the subject of Oliver Williamson's seminal book,Markets and Hierarchies. Written by leading economists, sociologists, and political scientists, the essays collected here reflect the fruitful intellectual exchange that is occurring across the major social science disciplines. They examine transaction cost economics' general conceptual orientation, its specific theoretical propositions, its applications to policy, and its use in systematic empirical research. The chapters include classic texts, (...) broad review essays, reflective commentaries, and several new contributions to a wide range of topics, including organizations, regulations and law, institutions, strategic management, game theory, entrepreneurship, innovation, finance, and technical information. The book begins with an overview of theory and research on transaction cost economics, highlighting the specific accomplishments of scholars working within the perspective and emphasizing the enormous influence that transaction cost reasoning exerts on the social sciences. The following section covers conceptual uses for the transaction cost framework and major theoretical or methodological elements within it, such as bounded rationality. While advancing some interesting theoretical propositions, these chapters are in fact more ambitious: each examines a specific field, area, or research program and attempts to fashion a new way of thinking about research questions. In the section on industrial applications, contributors study the application of transaction cost theory to a range of problems in utilities, telecommunications, laser printing, and early international trade. The book closes with four microanalytical chapters that delve into the structures and behaviors of specific aspects of firms and organizations: boards of directors, equity structures, employment models, human resource policies and practices, technology strategies, and innovation events. Firms, Markets, and Hierarchies collects excellent social science work on transaction cost economics, taking stock of its status, charting its future development, and fostering its renewal and evolution. (shrink)

This paper explores the conditions favouring or inhibiting the implementation of strategic corporate social responsibility policies in the context of global value chains. Using transaction cost theory, we specify the economic and behavioural issues raised by strategic CSR policies. We show that the existence of market rewards for such policies does not constitute a solution per se, but tends to increase the difficulties that value chain members face. Bringing TCT into the analysis of the diffusion of strategic CSR policies (...) in GVCs helps us to make different contributions. We first theoretically identify some limiting conditions of strategic CSR policies in GVCs. We also contribute to developing a more robust theoretical perspective for CSR in GVC research, which remains underdeveloped and mostly driven by empirical case studies. Finally, we shed light on new research questions and topics that could guide major theoretical and empirical investigations in the capacity of GVCs members to bypass the numerous difficulties involved in the implementation of strategic CSR policies. (shrink)

The purpose of the study is to present the author's method of digitalization of transactions of solved business tasks to reduce transaction costs of a manufacturing enterprise. The scientific novelty of the research lies in the fact that the elements of digitalization are proposed in the work to reduce the transaction costs of searching for information, negotiating, measuring, and concluding a contract. The introduction of digital technologies into specific business tasks contributes to the optimization of (...) class='Hi'>transaction costs in the modern institutional environment. As a result, the information relationship of the structural divisions of the production company was established during the performance of their functions at all stages of the production cycle from procurement to sales, the functional filling subsystems of the organizational structure were determined. Transaction costs, in accordance with their classification, are structured according to these subsystems, they represent the elements of digitalization recommended for use in the business processes of a manufacturing company to reduce its transaction costs. The introduction of digitalization processes of business tasks into the management structure helps to increase the level of validity and speed of decisions in the subsystems of the organizational structure of the company. (shrink)

In recent years, copyright governance for short videos has become a hot issue of common concern in the academic community and the industry. Therefore, this study intends to explore the economic aspect of copyright governance in relation to the proliferation of infringing short videos. The short video industry of China has been taken as a case to demonstrate the copyright governance issue. Transaction cost theory has been applied to analyze the economic aspect of copyright governance in terms of four (...) dimensions: bounded rationality, opportunism, environmental uncertainty, and asset specificity. From the perspective of transaction cost economics, the problem of short video infringement is observed to be essentially a market failure due to high transaction costs. In the short video market, substantial transaction costs are incurred in the legal transaction of copyright with these costs considered to be too high. This is especially the case when transaction costs exceed the net proceeds initially expected by short video users from the authorization, making it impossible to carry out the transaction and leading to infringement. To effectively control the copyright infringement of short videos, it is necessary to build a cross-platform information-sharing mechanism to reduce search costs, establish a unified copyright management platform to reduce coordination costs, and give full attention to the role of technical support to reduce regulatory costs. (shrink)

In this paper we investigate the legal arrangements involved in UK surrogate motherhood from a transaction-cost perspective. We outline the specific forms the transaction costs take and critically comment on the way in which the UK institutional and organisational arrangements at present adversely influence transaction costs. We then focus specifically on the potential role of surrogacy agencies and look at UK and US evidence on commercial and voluntary agencies. Policy implications follow.

Purpose of the study is to determine factors influencing transaction costs on the sharing economy. The article examines the evolution of the fundamental concept of economic theory – transaction costs, under the influence of the expansion of sharing economy. The sharing economy appears to be the result of the further development of the consumption economy, since within the framework of this economic system, the quality of the services provided is improving. The scientific novelty lies in the (...) clarification of the mechanism of mutual development of both the sharing economy and transaction costs. As a result, the importance of the factor of massive use of the Internet and mobile devices by a huge number of people, as influencing the service provision market, was revealed. At the same time, there is no need to overcome various barriers, and entrepreneurs have the opportunity to sell not so much reductions in production costs, but rather a reduction in transaction costs. (shrink)

This article provides a method for estimating the bounds of transaction costs in horizontal mergers. Consider, for example, a completed monopoly merger in linear Cournot oligopolies with 10 symmetric firms. The method shows that its transaction costs are at most 25% (78%) of total premerger profits if there is zero (100%) excess capacity. Such estimations can be extended in a straightforward manner to other mergers and other oligopoly models. The estimation is based both on the profitability (...) precondition, and on the non-empty core precondition, which postulates that the split of a merger’s profits be in its core. The article shows that the core in linear Cournot oligopolies has a non-empty interior, and indicates that the non-empty core precondition also sheds new lights on understanding important issues such as the stylized fact that mergers are likely to occur in markets plagued by excess capacities; why profitable mergers might not be formed; and why completed mergers might break up in the future. (shrink)

Tim Maudlin's argument for the inconsistency of Cramer's Transactional Interpretation of quantum theory has been considered in some detail by Joseph Berkovitz, who has provided a possible solution to this challenge at the cost of a significant empirical lacuna on the part of TI. The present paper proposes an alternative solution in which Maudlin's charge of inconsistency is evaded but at no cost of empirical content on the part of TI. However, Maudlin's argument is taken as ruling out Cramer's heuristic (...) "pseudotime" explanation of the realization of one transaction out of many. (shrink)

The U.S. health care system is ostensibly market based and therefore at least partially reliant on competition and consumer demand to regulate costs. Yet information about an essential feature of market transactions—costs—is typically obscure to patients until long after treatment. When discussing what must be disclosed for informed consent, the same list of required information is often mentioned regardless of the health care system in question, and information about costs rarely merits a place within this list. However, (...) our assumptions about what a moral principle requires need to be responsive to the realities of the health care system in which the principle is applied.This paper explores the moral foundations of disclosure and informed consent to argue that, in a market‐based system of the sort found in the United States, these same considerations support a requirement to disclose out‐of‐pocket costs before patients receive care. Next, I consider two objections to this view: first, that health care practitioners should focus solely on medical considerations in their encounters with patients and, second, that disclosing out‐of‐pocket costs would be too difficult to be mandated. I argue that medical and financial interests are inseparable within the U.S. health care system. If the difficulties in disclosing costs are deemed insurmountable, then the current system may prove unsustainable, both morally and financially, since we face the same practical impediments to implementing any meaningful consumer‐driven, market‐based health care reform. Finally, I explore some of the consequences of failing to disclose costs. The requirements of disclosing costs can be supported by the principle of respect for autonomy, regardless of the consequences, but in light of the consequences of the decision of whether to disclose, a concern about justice provides further support. (shrink)

La publicación en abierto de los artículos conlleva unos gastos conocidos como cargos por procesamiento de artículos. El objetivo de este trabajo es determinar el coste de los artículos publicados en abierto mediante APC de autoría española en cinco categorías temáticas de las ciencias sociales: Humanities, Sociology, Information Science & Library Science, Education & Educational Research y Communication de la Colección Principal de la Web of Science durante el periodo 2012-2019. Se han identificado las revistas, las instituciones financiadoras y los (...) modelos de publicación más frecuentes. El estudio indica que de las 223 revistas que publicaron artículos con APC las que más lo hicieron fueron Communication & Society, Comunicar y el Profesional de la Información. El gasto total en APC fue de 481.120,4 € y el coste medio de 1.129 €. Las revistas con mayor coste fueron Computers & Education, Scientometrics y IEEE Transactions on Learnig Technologies. Los modelos de publicación más frecuentes fueron DOAJ Gold, Green Published y Green Accepted. En el 53% de los artículos constaba que la financiación procedía del gobierno de España, en el 25% de gobiernos autonómicos, en el 21% de la Unión Europea y en el 20% de las universidades. El coste medio de los APC de las publicaciones estudiadas está dentro de las cantidades habituales a nivel mundial, siendo más caros los APC en revistas con impacto más alto y en las áreas Information Science & Library Science y Sociology. Conocer los APC puede orientar las políticas y el apoyo institucional al acceso abierto y mejorar de los recursos académicos. (shrink)

It may seem reasonable, even inevitable, that architectural practice should be based on an understanding that architects, like lawyers and doctors, should discover their clients' needs and accommodate them to the best of their abilities. But current discussion within the legal and medical professions of the conflict between service to private individuals who can pay, and to the public who cannot, suggest an expanded or altered definition of professional responsibility. Actually, the conflict between public and private interest may be more (...) acute in architecture than in other professions: the kind of buildings architects design are costly and are made possible only by the wealth of a small segment of the population or the state, yet every one raised affects the lives of people other than the one who makes the program and pays the architect for his services. Furthermore, the decisions of architects are embodied in buildings that last for generations, even for millennia, so that the overwhelming majority of people in our culture live and work in places designed not only for other people but for other times and conditions. For this reason, even the "private" practice of architecture involves responsibilities to a widespread constituency. James S. Ackerman is the author of The Architecture of Michelango, Art and Archaeology, The Cortille del Belvedere, Palladio and Palladio's Villas and is professor of fine arts at Harvard University. He has contributed "On Judging Art without Absolutes" to Critical Inquiry. (shrink)

Tasubinsa is a "Special Employment and Occupational Center" constituted in accordance with Spanish Law where 90% of the workers have mental, sensorial or physical impairments of at least 30%. Its positive experience of more than 15 years provides entirely different responses from mainstream neoclassical theory (transaction cost theory, agency theory, and shareholder theory) to basic questions such as "What is a firm?", "What is its purpose?", "Who owns a firm?", and "What do a firm's owners seek?". The article discusses (...) how these different premises give rise to a distinctive corporate culture centered on the handicapped person. (shrink)

Across the management, social science, and business ethics literatures, and in much of the philosophy literature, trust is characterized as a disposition to act given epistemic states—beliefs and/or expectations about others and about the risks involved. This characterization of trust is best thought of as epistemological because epistemic states distinguish trust from other dispositions. The epistemological characterization of trust is the amoral one referred to in the title of this paper, and we argue that this characterization is conceptually inadequate. We (...) outline and defend an alternative conception of trust as a moral phenomenon: when A trusts B to do something, A invites B to acknowledge and accept an obligation; when B accepts the invitation, B takes on an obligation; in that way trust creates an obligation. We conclude with an application, drawing out the difference between the epistemological conception of trust and our own in the context of Ghoshal et al.'s (Sloan Management Review 40:9—20, 1995, Academy of Management Learning & Education 4:75—91, 2005) critique of transaction cost theories of the firm. (shrink)

Increasing the tax compliance of self-employed business owners—particularly of trade-specific service providers such as those involved in construction and repair work—remains an ongoing challenge for tax authorities. From a compliance point of view, cash transactions are particularly problematic when services are paid for on the spot, as these exchanges are difficult to audit. We present experimental evidence testing ten different policy strategies rooted in the enforcement, service, and trust/social paradigms, in a setting that allows payment either via a transaction (...) that directly reports income for tax collection purposes or in cash, where taxes are only collected on reported income. Our sample includes both a typical subject pool of students, as used in most previous studies, and non-students who are active within service industries characterised by the opportunity to engage in cash transactions. While our comparative results show that, for both student and non-student participants, interventions that rely on greater enforcement by the tax authority have the greatest effect on compliance in our cash economy setting, treatments involving cooperative elements may be similarly effective in enhancing tax compliance. Given their effectiveness, cooperative approaches should therefore be considered for addition to the policy mix if implemented at relatively low costs, making both carrot and stick approaches promising to increase compliance in an environment where cash-for-service payments offer a common benefit for small businesses and their customers from implicit collusion that enables tax evasion. (shrink)

Regulation is often applied to business behavior to ensure that the social costs of doing business are included in the cost and pricing structures of the firm. Because the consumer benefits from the transaction that generated the social costs, asking the consumer to bear the burden imposed by the transaction is fair. However, there may be a lack of Justice m the internal and external distribution of the social costs of doing business if consumers are (...) the only party bearing that burden, or if the costs are being shifted to employees or taxpayers when a closer stakeholder is also benefiting from the transaction – the stockowner. A social justice perspective requires that those benefiting from a transaction share in the burdens of it. We propose that a Tobin-like tax on stock transactions might be a just means of achieving greater justice in the distribution of the social cost burden. (shrink)

Many economic theorists hold that social institutions can lead otherwise irrational agents to approximate the predictions of traditional rational choice theory. But there is little consensus on how institutions do so. I defend an economic internalist account of the institution-actor relationship by explaining economic rationality as a feature of individuals whose decision-making is aided by institutional structures. This approach, known as the subjective transaction costs theory, represents apparently irrational behavior as a rational response to high subjective transaction (...) costs of thinking and deciding. The theory has two attractive features. First, it reconciles rational choice theory with the increasing body of evidence cataloguing putative errors in economic decision-making. Second, it vindicates the explanatory power of individual choice against externalist challenges; the subjective transaction costs theory keeps economic rationality in the head. (shrink)

According to Joseph Heath, privatizations should be judged on a case-by-case basis with appeal to the Pareto criterion. This approach, or so I argue, amounts to a depoliticization of privatization. While Heath’s approach is effective and at times illuminating, I show that a consistent application of his methodology is self-defeating in that it eventually requires a politicization of privatization. With appeal to transaction cost theory, I show there are social costs associated with affirming the competitive pressures of the (...) market. Subsequently, I argue that while private actors may, according to Heath, pursue efficiency with appeal to an adversarial morality, state-owned enterprises (SOEs) are much more constrained in how they may achieve such gains. Due to the pressures of liberal neutrality, SOEs may chase efficiency only without setting actors back. Conversely, the private sector’s potential for success is predicated on its ability to compete for Kaldor-Hicks efficiency, which specifically allows for win-lose interactions. While SOEs are often no more able than the private sector to achieve Pareto optima, this discrepancy makes it so that SOEs produce gains that are ex-ante lower but more equal, whereas the private sector produces gains that are ex-ante higher but more unequal. Thus, the social cost of affirming the competitive pressures of the market is ex-ante inequality. If this premise is accepted, there is no way to avoid the conclusion that a consistent case-by-case approach requires a structural, political view on how privatizations affect the state’s ex-post Pareto-enhancing abilities. (shrink)

Current economic ontology development has failed to confront two important errors associated with historicism. Embracing the linearity of economic value being directly attributed to the labor applied to natural resources taken together with efficiency arguments used to justify monetary policy on both the microlevel (transaction) and macrolevel (global trade), we know these legacies of the scientific method applied to economic systems have left the G-20 paralyzed to deal with structural failings evidenced from banking to business to economic policy. An (...) exploration of the structural modalities that impair our current capacity for adaptation and alternative methods for accounting for value is the basis for this inquiry. Integral accounting is proposed as a more suitable method to transition from scarcity-based market models to abundance-based modes of sustainable engagement. (shrink)

This article examines Sagoff's criticisms of 'Four Dogmas of Environmental Economies' and argues that none of them are fatal. Many of the criticisms appear to rest on general misunderstandings about welfare economics. One misunderstanding is that transaction costs are theoretically indistinguishable from regular production costs. The theoretical distinction is that transaction costs vary under alternative policies and institutions whereas production costs are fixed by tastes, technology and endowments. Another misunderstanding is that market failure concerns (...) only Pareto efficiency. Market failure also concerns social efficiency with respect to the 'social welfare function', a device for making explicit ethical judgments about the interpersonal distribution of welfare. A third misunderstanding is that the 'rationality assumption' drives economic theory. In fact, the explanatory power of economic models comes mainly from explicit assumptions about the constraints facing economic agents. A fourth misunderstanding is that welfare economics is used as a mechanism for making legal and political decisions. Rather, welfare economics is used as a method for informing legal and political decisions by evaluating their outcomes on the basis of individual welfare. Used properly, it can improve the democratic process by bringing hidden costs and difficult issues to the attention of both policy-makers and the wider public. (shrink)

Cross-compliance has proven its effectiveness, as can be shown by looking at the Swiss experience with cross-compliance since 1999. Besides describing the existing cross-compliance practices in Switzerland, the paper shows different perspectives on the efficiency and fairness of cross-compliance. It concludes that transaction cost advantages justify cross-compliance only in few cases. Usually, it will be more efficient to decouple social and environmental policy. The strong support for cross-compliance by the Swiss population is explained by a perceived unfairness in the (...) distribution of property rights between farmers and society. If property rights would be redistributed, there probably would be no more need for cross-compliance. (shrink)

Idealizations help us understand the world by simplifying it. When factors make discrete contributions to an outcome, leaving factors out can make it easier to identify the contributions of factors that remain. But typically in economics, factors are not discrete but interact; how can isolating some factor X from some factor Y help us understand a reality in which X’s contribution depends on what Y contributes? I argue that Ronald Coase’s method in ‘The Problem of Social Cost’ illustrates how idealization (...) can aid our understanding of a world in which factor Y (transaction costs) has an effect on factor X (transactions), by making plain precisely that effect, and so making it easier to see features of the actual world that obtain because of that effect. ‘Coasean’ idealization is therefore especially useful for understanding targets in which factors are not discrete but interact, as is so often the case in economics. (shrink)

This paper views corruption as a form of contracting amenable to analysis from the viewpoint of transaction-cost economics. Concepts such as transaction, bounded rationality, opportunism, and asset specificity are shown to apply to cases of corruption. Both market and parochial corruption are hypothesized to vary in accordance with changes in the specificity of assets invested to support the corruption transaction. Evidence from a number of different studies tends to support the hypothesized relation. The implications of the (...) class='Hi'>transaction-cost perspective are developed for policy makers and directions for future research are suggested. (shrink)

Property rights of personal data have been advocated for some time. From the perspective of economics of law some argued that they could lower transaction costs for contracts involving personal data. This may be the case, but new transaction costs are introduced by propertization and the issue has not been settled. In this paper, I focus on a different and potentially more important aspect. In the actual situation, data collectors externalize costs and internalize benefits. An (...) ownership regime that enables every citizen to hold a personal data account, like a bank account, and that gives people ownership rights over secondary use of personal data could correct these misallocations. I hope to shed new light on the normative implications of the issue by offering normative justifications for property rights of personal data (Sections 2–4). Secondly, I present fundamental goals and building blocks of a property regime of personal data (Section 5) and, thirdly, I illustrate how income from personal data ownership could for instance contribute to financing pensions under proper regulation (Section 6). (shrink)

This article brings forward the argument that the practical implementation of a corporate governance code cannot be realized by a compliance program alone. Its relevance in everyday business is determined by the moral values of the company culture. In this context, governance is defined as a company’s resources and capabilities, including the moral resources, to take on responsibility for all its stakeholders. A critical discussion of the agency theory, transaction cost theory, and organization theory shows that such an approach (...) is possible only when a company is not perceived as a maximizing machine for shareholders’ interests but as an economic form of cooperation of internal and external resources and stakeholders. An empiric study on 22 European corporate governance codes shows that the predominant majority of European codes orientate themselves to stakeholders and the company. The discussion of the empirical data reveals six basic principles that determine all European corporate governance codes: shareholder rights, transparency, voting rights, regulation of remuneration, design of organizational structures, and corporate social responsibility. (shrink)

Farm to School (FTS) programs are increasingly popular as methods to teach students about food, nutrition, and agriculture by connecting students with the sources of the food that they eat. They may also provide opportunity for farmers seeking to diversify market channels. Food service buyers in FTS programs often choose to procure food for school meals directly from farmers. The distribution practices required for such direct procurement often bring significant transaction costs for both school food service professionals and (...) farmers. Analysis of data from a survey of Vermont farmers who sell directly to school food services explores farmers’ motivations and distribution practices in these partnerships. A two-step cluster analysis procedure characterizes farmers’ motivations along a continuum between market-based and socially embedded values. Further bivariate analysis shows that farmers who are motivated most by market-based values are significantly associated with distribution practices that facilitate sales to school food services. Implications for technical assistance to facilitate these sales are discussed. (shrink)

Can firms overcome credit constraints with a corporate culture of high integrity? We empirically address this question by studying their investment–cash flow sensitivities. We identify firms with a culture of integrity through textual analysis of public documents in a sample of Chinese listed firms and also through corporate culture statements. Our results show that firms with an integrity-focused culture have lower investment–cash flow sensitivity, even after we address endogeneity concerns. However, we also find that for the culture to reduce the (...) investment–cash flow sensitivity, external stakeholders must be able to verify this culture through a low information asymmetry environment. Overall, our findings show that a corporate culture of high integrity can mitigate a firm’s external transaction costs. (shrink)

Prior literature on socially responsible investment has contended that excluding “sin stocks” from a portfolio will reduce performance and increase risk. Further, incorporating stocks of firms with positive social responsibility scores will improve performance and reduce risk. We simulate portfolios designed to mimic typical equity mutual funds’ holdings and investigate these propositions. We remove the potentially confounding influences of differences in manager skill, transaction costs and fees, and conduct a clean experiment on the effect of positive and negative (...) portfolio screening. We find no difference in the return or risk of screened and unscreened portfolios. We conclude that a typical socially responsible fund will neither gain nor lose from screening its portfolio. (shrink)

The growth of global value chains (GVCs) and the emergence of novel forms of value chain governance pose two questions for normative business ethics. First, how should we conceptualize the relationships between members of a GVC? Second, what ethical implications follow from these relationships, both with respect to interactions between GVC members and with respect to achieving broader transnational governance goals? We address these questions by examining the emergence of transnational eco‐labeling as an increasingly prominent form of GVC governance that (...) is redefining the relationship between nominally independent firms. On the first question, we argue that GVCs occupy a middle ground between intrafirm and interfirm transactions, thereby posing a challenge to theoretical frameworks that attempt to apply ethical standards based on transaction types. On the second question, we argue that this unique institutional status leads to a range of novel ethical considerations and dilemmas for GVC members. Lead firms, their suppliers, and third‐party standard‐setters all confront new ethical quandaries when third‐party eco‐labeling is introduced to a GVC. The nature of these quandaries means that, while GVCs may be well‐positioned to serve as instruments of transnational governance, they are frequently not well‐oriented to do so. Our analysis marks an initial attempt to map the ethical considerations that apply to members of a GVC, and in doing so, places the literature on normative business ethics and transnational governance in a closer conversation. (shrink)

Faculty of Law and Department of Philosophy, University of Toronto 1. INTRODUCTION The economic analysis of law has gone through a remarkable change in the past decade and a half. The founding articles of the discipline – such classic pieces as Ronald Coase’s “The problem of social cost” (1960), Richard Posner’s “A theory of negligence” (1972) and Guido Calabresi and Douglas Malamed’s “Property rules, liability rules, and inalienability: One view of the cathedral” (1972) – offered economic analyses of familiar aspects (...) of the common law, seeking to explain, in particular, fundamental features of the law of tort in terms of such economic ideas as transaction costs (Coase), Kaldor-Hicks efficiency (Posner), or minimizing the sum of the accident costs and avoidance costs (Calabresi and Malamed). In each case, they argued that the law of torts should be understood as a set of liability rules selected for their incentive effects, rather than as a set of substantive rights and remedies for their violation. These authors claimed to be able to explain most of the features of tort law and, where features were found that did not fit with their preferred explanations, recommended modification. Although they disagreed on important questions,1 each of the pieces seems to work a manageable structure into what strikes first-year law students as an otherwise random morass of common-law judgments. Generations of legal academics were introduced to these works, and drawn into their way of looking at things. As a student studying first-year torts with Calabresi at Yale, I had the sense that I was in the presence of greatness. (shrink)

Setting up affiliated companies in tax havens is a legitimate, but ethically dubious, business practice. This study examines the conditions under which emerging business groups tend to use such a business practice. Business groups in emerging economies have been operating in weak institutional environments with substantial government intervention and ineffective market-supporting institutions. Having offshore companies in tax havens enables the groups to bypass some market transaction costs and institutional constraints, and it also provides them the opportunity to evade (...) taxes and hide illegal conduct, such as bribery. Empirical evidence based on a sample of Taiwanese business groups showed that business groups with a higher level of prosocial orientation established fewer offshore companies in tax havens, as manifested by their commitment of resources to establishing nonprofit organizations. In contrast, groups that have higher levels of product and international diversification tend to use this ethically dubious business practice. However, highly internationalized groups are less likely to do so when they have committed substantial resources to prosocial activities. (shrink)

Scientific discourse is rife with passages that appear to be ordinary descriptions of systems of interest in a particular discipline. Equally, the pages of textbooks and journals are filled with discussions of the properties and the behavior of those systems. Students of mechanics investigate at length the dynamical properties of a system consisting of two or three spinning spheres with homogenous mass distributions gravitationally interacting only with each other. Population biologists study the evolution of one species procreating at a constant (...) rate in an isolated ecosystem. And when studying the exchange of goods, economists consider a situation in which there are only two goods, two perfectly rational agents, no restrictions on available information, no transaction costs, no money, and dealings are done immediately. Their surface structure notwithstanding, no competent scientist would mistake descriptions of such systems as descriptions of an actual system: we know very well that there are no such systems. These descriptions are descriptions of a model-system, and scientists use model-systems to represent parts or aspects of the world they are interested in. Following common practice, I refer to those parts or aspects as target-systems. What are we to make of this? Is discourse about such models merely a picturesque and ultimately dispensable façon de parler? This was the view of some early twentieth century philosophers. Duhem (1906) famously guarded against confusing model building with scientific theorizing and argued that model building has no real place in science, beyond a minor heuristic role. The aim of science was, instead, to construct theories, with theories understood as classificatory or representative structures systematically presented and formulated in precise symbolic.. (shrink)

If market transactions are optimal, why do so many transactions occur within firms themselves? Ronald H. Coase explains this phenomenon by arguing that market transaction costs differ from intra-company transaction costs and that clear intra-intra-firm property rights have the effect of reducing transaction costs. But what exactly are the relevant transaction costs, and what factors determine them? Oliver Hart argues that market contracts are incomplete, and that the key to improving efficiency is (...) putting the power to deal with these unspecified circumstances into the hands of owners within the same entity.In this paper, I argued that, the development of the theory and practice of business ethics as well as China’s innovative practice in recent decades provide a new perspective, one that is especially relevant to the issues raised by Case and Hart and that bear directly on the reform of China’s state-owned enterprises. (shrink)