Transaction Cost Economics

62 A. Nygaard, S. A. Haugland og A. I Rokkan BETA 2/2000 FORSKNINGSNOT AT: Strukturell utvikling i norsk hotellvirksomhet: en preliminaer empirisk analyse av agentkostnader og skalafortrinn ARNE NYGAARD, SVEN A. HAUGLAND OG AKSEL I. ROKKAN Innenfor hotellvirksomhet har vi de siste årene sett tendenser til reorganisering og satsing på kjededrift, varemerker og allianser. I dette forskningsnotatet diskuterer vi drivkreftene bak denne utviklingen. Arne Nygaard, Norges Markedshøyskole, Handelshøyskolen BI, Trondheimsveien 2, Postboks 4636 Sofienberg, 0506 Oslo. [email protected] Sven A. Haugland, Instituu for strategi og ledelse, Norges Handelshøyskole, Breiviksveien 40, 5045 Bergen. [email protected] Aksel I. Rokkan, Senter for strategi og ledelse, Stiftelsen for samfunns-og naeringslivsforskning, Breiviksveien 40, 5045 Bergen. [email protected]

Democracy is an economic problem of choice constrained by transaction costs and information costs. Society must choose between competing institutional frameworks for the conduct of voting and elections. These decisions are constrained by the technologies and institutions available. Blockchains are a gov-ernance technology that reduces the costs of consensus, coordinating information , and monitoring and enforcing contracts. Blockchain could be applied to the voting and electoral process to form a crypto-democracy. Analysed through the Institutional Possibility Frontier framework, we propose that blockchain lowers disorder and dictatorship costs of the voting and electoral process. In addition to efficiency gains, this technological progress has implications for decentralised institutions of voting. One application of crypto-democracy, quadratic voting, is discussed.

We draw upon evolutionary economics and transaction cost economics to examine how alliance experience accumulation at the parent firm level and alliance features at the transaction level jointly and interactively shape the favorability of research alliances' termination outcomes. Fifteen percent of the terminated alliances we examined were successful, 34% were failures, and 51% experienced an intermediate outcome in the form of contract expiration or unilateral withdrawal by a partner. We find that the effect of partner-specific experience on the favorability of termination outcomes is greater for non-equity alliances than for equity structures affording stronger formal governance mechanisms. Other forms of experience such as general alliance experience or prior alliances in the same technological area as the focal agreement have no such favorable consequences for alliance termination. The findings also indicate that alliance complexity adversely influences firms' termination outcomes in alliances. We therefore find evidence in partial support of both evolutionary and transaction cost based arguments for the explanation of termination outcomes in research alliances.

This study aims to identify the factors that affect Iranian manufacturing SMEs' decision to outsource accounting functions (activities) using a transaction cost economics (TCE) perspective. Based on a questionnaire survey data of 658 Iranian manufacturing SMEs, this study found support for three TCE predictions, that is, asset specificity, frequency and trust in accountant, which are significantly associated with the accounting function outsourcing intensity. The other two predictors that were examined, that is, behavioral uncertainty and environmental uncertainty, were not significantly associated with accounting function outsourcing intensity. Therefore, we provide a specific, theoretically and empirically grounded prediction of how TCE attributes influences outsourcing of accounting functions with implications for theory and practice.

Purpose -The paper offers a viewpoint on the relevance of the underpinnings of the social exchange theory (SET) in understanding inter-firm relationships, specifically with respect to outsourcing relationships in a Southeast Asian context. Design/methodology/approach -The viewpoint is based on literature review on outsourcing trends, characteristics and underlying theories including the underpinnings of SET in combination with anecdotal accounts from practitioners in the electrical and electronics (E&E) sector as well as personal emic observations of management styles embedded within the socio-cultural context of a developing country. Findings -Management and outsourcing of contracts in a Southeast Asian context are usually done on a personal level with some leeway provided by top management. The reverse is true for developed countries where all processes and contracts need to be seen as just and transparent to stakeholders. Dominant theories identified with outsourcing generations seem to be embedded in management culture of developed countries which are largely influenced by the transaction cost economics theory and its extensions, the resource-based view and the resource-dependence view. By placing a caveat on generalizability, the paper opines that SET is still relevant in the Southeast Asian context. Originality/value -As outsourcing characteristics have changed and evolved over the years, relationship models need to be reviewed and redefined to be in congruence with the changes that are occurring. The Southeast Asian socio-cultural context can be a reference point for conceptualization of relationship models to understand E&E outsourcing relationships along global supply chains.

Governance of economic exchange or transactions is at the core of the growth and development of the economy. Sharing similar intellectual heritages, transaction cost economics (TCE) and new institutional economics (NIE) both seek to understand how exchange is conducted. An economy can be conceptualised as a range of organisations, within each and between each there are a nexus of transactions. Such transactions or exchanges involve the transfer of some or all of the property rights in goods, services, knowledge and assets. Without the ability to engage in economic exchange, a society's growth is limited. While all societies undertake individual (or private) economic exchange, even if the exchange is in the form of barter, individual exchange limits the scale and scope of a society's economic development. Economic development requires multilateral exchange to facilitate the complex division of labour and specialisation of economic activities, where gains from economic exchange in assets (comprising assets, goods, services and knowledge) deliver sustained economic growth. Economic exchange is organised through governance structures, which comprise markets, firms and intermediate economic organisations, such as franchises, licenses, alliances and long-run contracts (see Figure 1.1). TCE matches transactions to their optimal governance structures. NIE places governance structures in their wider institutional context, constraining (or facilitating) the choice of governance structure. Both governance structures and institutions safeguard exchange. To understand the growth of societies, transactions, governance structure and institutions are matched in a discriminating way. When NIE (and increasingly TCE) economists study 3 governance, they analyse how transactions are organised within their institutional context. TCE takes the transaction as the unit of analysis. A transaction is an exchange of property rights in assets, where the property rights gives the owner the right to exclude others from use of the asset, to appropriate rents from the assets and to sell the asset. An economy can be depicted as a nexus of transactions, where transactions are governed by governance structures. There are three categories of governance structures: markets, firms and intermediate contractual arrangements (including franchises, licenses, alliances, long terms contracts etc), as shown in Figure 1.1. TCE uses several words interchangeably, including governance structure, economic organisation, contract and contractual arrangement. The theoretical basis of TCE lies in the work by Coase and the economic literature on externalities, which explains the early focus of TCE on firms and markets. Transaction costs are the cost of operating the market system, including costs related to the search for a party with whom to transact, costs of negotiating the terms of transacting, and costs of ensuring (i.e. monitoring and enforcing) the parties fulfils their exchange obligations. Coase's work sprang from the problem of externalities and social costs, which analysed how competitive firms and individual maximising actions resulted in suboptimal social outcomes. In the absence of transaction costs, Coase 4

Blockchain promises greater speed, security, accuracy, and transparency for every electronic transactional or record-keeping process. Proponents say Blockchain will make processing payments, trading stocks, managing health-care records and birth certificates, processing property titles, monitoring digital supply chains, and coordinating the growing Internet of Things (IoT) faster, easier, and cheaper. Notwithstanding this growing litany of theoretical benefits and proposed use cases, Blockchain's real potential of attaining widespread adoption is unclear. Commentators are characterizing the next two years as an early adopter phase that will prepare industry, government, and society for the real Blockchain revolution yet to begin. The goal of this research paper is to present evidence of early adopter activity indicating that Blockchain is on track to fulfill its potential to adapt to, and transform our society. The research includes historical background, a survey of current literature on early adopter activities, and a brief evaluation of various implementations of Blockchain, including a discussion of their current application.