Information asymmetry and transaction costs in a cross-cultural business transaction

The intent of this paper is to provide a practitioners insight into the present and foreseeable future of problem of transaction cost economics related to culture and business etiquette that may increase the of complexity of business communication. We will also explore whether it impacts participant's mindsets regarding opportunistic or passive aggressive behavior. We will study the role of culture, ethics, information asymmetry, and legal systems regarding their importance towards the business contracts and lack of knowledge in local environments. We will make connections to contract theory strategies and objectives and recommend business practices. Furthermore, economic theory explores the role of the impossibility of the perfect contract. Historical and present day operational factors are examined for the determination of forward-looking contract law indications worldwide. This paper is intended provide a practitioners view with a global perspective of a multinational, mid-sized and small corporations giving consideration in a non-partisan and non-nationalistic view, yet examines the individual characteristics of the operational necessities and obligations of any corporation. The study will be general, yet cite specific articles to each argument and give adequate consideration to the intricacies of the global asymmetry of information. This paper defends that corporations of any kind and size should be aware of the risk of international business etiquette and cultural barriers that might jeopardize the savings you could obtain from engaging international suppliers.

Fuzzy rule-based system for evaluation of uncertainty transaction in cassava chain

A fuzzy ruled-based system was developed in this study and resulted in an index indicating the level of uncertainty related to commercial transactions between cassava growers and their dealers. The fuzzy system was developed based on Transaction Cost Economics approach. The fuzzy system was developed from input variables regarding information sharing between grower and dealer on “Demand/purchase Forecasting”, “Production Forecasting” and “Production Innovation”. The output variable is the level of uncertainty regarding the transaction between seller and buyer agent, which may serve as a system for detecting inefficiencies. Evidences from 27 cassava growers registered in the Regional Development Offices of Tupa and Assis, São Paulo, Brazil, and 48 of their dealers supported the development of the system. The mathematical model indicated that 55% of the growers present a Very High level of uncertainty, 33% present Medium or High. The others present Low or Very Low level of uncertainty. From the model, simulations of external interferences can be implemented in order to improve the degree of uncertainty and, thus, lower transaction costs.

Risk, Transaction Costs, and Tax Assignment: Government Finance in the Ottoman Empire

Risk and transaction costs often provide competing explanations of institutional outcomes. In this paper we argue that they offer opposing predictions regarding the assignment of fixed and variable taxes in a multi-tiered governmental structure. While the central government can pool regional risks from variable taxes, local governments can measure variable tax bases more accurately. Evidence on tax assignment from the mid-sixteenth century Ottoman Empire supports the transaction cost explanation, suggesting that risk matters less because insurance can be obtained in a variety of ways.

Transaction attributes and buyer-supplier relationships in AMT acquisition and implementation:the case of Malaysia

This paper explores how transaction attributes of technology affect differences in the relationship between technology buyers and suppliers. It also examines the impact on performance of different patterns of relationship between technology buyers and suppliers. Data obtained from 147 manufacturing firms in Malaysia are used to test several hypotheses, which were derived from a review of the literature on technology, transaction cost theory and buyer–supplier relationships (BSR). The research results indicate that the higher the level of technological complexity, specificity and uncertainty, the more firms are likely to engage in a closer relationship with technology suppliers. Even though the majority of firms reported improvements in their performance, results indicate that firms demonstrating a closer relationship with technology suppliers are more likely to achieve higher levels of performance than those that do not. It is also shown that with high levels of transaction attribute, implementation performance suffers more when firms have weak relationships with technology suppliers than with moderate and low levels of transaction attribute.

A tranzakciós költségek és a szabványosítás kapcsolata (Relationship between transaction costs and standardization)

Az elmúlt néhány évtizedben a szabványosítás terén igen komoly változások mentek végbe. Ugrásszerűen megnőtt a szabványok száma, és jelentősen átalakult a szabványosítás folyamata is. Ezzel párhuzamosan a téma gazdasági hatásaival foglalkozó kutatások száma is megsokszorozódott, ami elsősorban a hálózati externáliák irodalmának robbanásszerű gyarapodásának köszönhető. Jelen tanulmány – az elméletek fősodrától eltérően – a tranzakciós költségek elméletében (TKE) helyezi el a szabványosítást. A szabványok és a tranzakciós költségek kapcsolatáról már születtek korábban is tanulmányok, de ezek a szabványoknak a tranzakciós költségekre gyakorolt hatásaira fókuszáltak. A tanulmány ezzel szemben arra helyezi a hangsúlyt, hogy azonosítsa a tranzakciós költségeknek a szabványosításra gyakorolt hatásait. A kutatás célja, hogy olyan elméleti alapot adjon, amelyben a témakör átfogóan elemezhető. A fő kutatási kérdés az, hogy mitől függ az, hogy melyik mechanizmus kereteiben érdemes a szabványosítást lebonyolítani. ________ Significant changes have characterized the last few decades of standardization. The number of standards has dramatically increased and processes of standardization have also changed a lot. At the same time the amount of researches that are concerned with the economic impact of standardization has also multiplied due to the boom in the literature of network externalities. Unlike the mainstream, this paper places standardization in the theory of transaction cost economics. Although there are earlier papers that are concerned with the relationship between standards and transaction costs, these studies focus on the impact of standards on transaction costs. In contrast, this paper lays emphasis on the identification of the impact of transaction costs on standardization. This study aims to provide a theoretical basis for the comprehensive analyses. The main research question: What determines which coordination mechanism is used to evolve a standard?

Trois essais sur les banques et le pouvoir de marché

Cette thèse examine le rôle du pouvoir de marché dans le marché bancaire. L’emphase est mis sur la prise de risque, les économies d’échelle, l’efficacité économique du marché et la transmission des chocs. Le premier chapitre présente un modèle d’équilibre général dynamique stochastique en économie ouverte comprenant un marché bancaire en concurrence monopolistique. Suivant l’hypothèse de Krugman (1979, 1980) sur la relation entre les économies d’échelle et les exportations, les banques doivent défrayer un coût de transaction pour échanger à l’étranger qui diminue à mesure que le volume de leurs activités locales augmente. Cela incite les banques à réduire leur marge locale afin de profiter davantage du marché extérieur. Le modèle est solutionné et simulé pour divers degrés de concentration dans le marché bancaire. Les résultats obtenus indiquent que deux forces contraires, les économies d’échelle et le pouvoir de marché, s’affrontent lorsque le marché se concentre. La concentration permet aussi aux banques d’accroître leurs activités étrangères, ce qui les rend en contrepartie plus vulnérables aux chocs extérieurs. Le deuxième chapitre élabore un cadre de travail semblable, mais à l’intérieur duquel les banques font face à un risque de crédit. Celui-ci est partiellement assuré par un collatéral fourni par les entrepreneurs et peut être limité à l’aide d’un effort financier. Le modèle est solutionné et simulé pour divers degrés de concentration dans le marché bancaire. Les résultats montrent qu’un plus grand pouvoir de marché réduit la taille du marché financier et de la production à l’état stationnaire, mais incite les banques à prendre moins de risques. De plus, les économies dont le marché bancaire est fortement concentré sont moins sensibles à certains chocs puisque les marges plus élevés donnent initialement de la marge de manoeuvre aux banques en cas de chocs négatifs. Cet effet modérateur est éliminé lorsqu’il est possible pour les banques d’entrer et de sortir librement du marché. Une autre extension avec économies d’échelle montre que sous certaines conditions, un marché moyennement concentré est optimal pour l’économie. Le troisième chapitre utilise un modèle en analyse de portefeuille de type Moyenne-Variance afin de représenter une banque détenant du pouvoir de marché. Le rendement des dépôts et des actifs peut varier selon la quantité échangée, ce qui modifie le choix de portefeuille de la banque. Celle-ci tend à choisir un portefeuille dont la variance est plus faible lorsqu’elle est en mesure d’obtenir un rendement plus élevé sur un actif. Le pouvoir de marché sur les dépôts amène un résultat sembable pour un pouvoir de marché modéré, mais la variance finit par augmenter une fois un certain niveau atteint. Les résultats sont robustes pour différentes fonctions de demandes.

Asset specificity and behavioural uncertainty as moderators of the sales growth : employment growth relationship in emerging ventures

Sales growth and employment growth are the two most widely used growth indicators for new ventures; yet, sales growth and employment growth are not interchangeable measures of new venture growth. Rather, they are related, but somewhat independent constructs that respond differently to a variety of criteria. Most of the literature treats this as a methodological technicality. However, sales growth with or without accompanying employment growth has very different implications for managers and policy makers. A better understanding of what drives these different growth metrics has the potential to lead to better decision making. To improve that understanding we apply transaction cost economics reasoning to predict when sales growth will be or will not be accompanied by employment growth. Our results indicate that our predictions are borne out consistently in resource-constrained contexts but not in resource-munificent contexts.

Delivering value for money in the procurement of public sector major infrastructure : a new first-order decision making model

The significant challenge faced by government in demonstrating value for money in the delivery of major infrastructure resolves around estimating costs and benefits of alternative modes of procurement. Faced with this challenge, one approach is to focus on a dominant performance outcome visible on the opening day of the asset, as the means to select the procurement approach. In this case, value for money becomes a largely nominal concept and determined by selected procurement mode delivering, or not delivering, the selected performance outcome, and notwithstanding possible under delivery on other desirable performance outcomes, as well as possibly incurring excessive transaction costs. This paper proposes a mind-set change in this particular practice, to an approach in which the analysis commences with the conditions pertaining to the project and proceeds to deploy transaction cost and production cost theory to indicate a procurement approach that can claim superior value for money relative to other competing procurement modes. This approach to delivering value for money in relative terms is developed in a first-order procurement decision making model outlined in this paper. The model developed could be complementary to the Public Sector Comparator (PSC) in terms of cross validation and the model more readily lends itself to public dissemination. As a possible alternative to the PSC, the model could save time and money in preparation of project details to lesser extent than that required in the reference project and may send a stronger signal to the market that may encourage more innovation and competition.

Information sharing with key suppliers : a contingency approach

This paper focuses on information sharing with key suppliers and seeks to explore the factors that might influence its extent and depth. We also investigate how information sharing affects a company’s performance with regards to resource usage, output, and flexibility. Drawing from transaction cost- and contingency theories, several factors, namely environmental uncertainty, demand uncertainty, dependency and, the product life cycle stage are proposed to explain the level of information shared with key suppliers. We develop a model where information sharing mediates the (contingent) factors and company performance. A mail survey was used to collect data from Finnish and Swedish companies. Partial Least Squares analysis was separately performed for each country (n=119, n=102). There was consistent evidence that environmental uncertainty, demand uncertainty and supplier/buyer dependency had explanatory power, whereas no significance was found for the product life cycle stage. The results also confirm previous studies by providing support for a positive relationship between information sharing and performance, where output performance was found to be the most strongly related

Determinants and effects of information sharing with key suppliers

This paper focuses on information sharing with key suppliers and seeks to explore the factors that might influence its extent and depth. We also investigate how information sharing affects a company’s performance with regards to resource usage, output, and flexibility. Drawing from transaction cost- and contingency theories, several factors, namely environmental uncertainty, demand uncertainty, dependency and, the product life cycle stage are proposed to explain the level of information shared with key suppliers. We develop a model where information sharing mediates the (contingent) factors and company performance. A mail survey was used to collect data from Finnish and Swedish companies. Partial Least Squares analysis was separately performed for each country (n=119, n=102). There was consistent evidence that environmental uncertainty, demand uncertainty and supplier/buyer dependency had explanatory power, whereas no significance was found for the relationship between product life cycle stage and information sharing. The results also confirm previous studies by providing support for a positive relationship between information sharing and performance, where output performance was found to be the most strongly related.

Asset specificity and behavioral uncertainty as moderators of the sales growth-employment growth relationship in emerging ventures

New venture growth is a central topic in entrepreneurship research. Although sales growth is emerging as the most commonly used measure of growth for emerging ventures, employment growth has also been used frequently. However, empirical research demonstrates that there are only very low to moderately sized correlations between the two (Delmar et aL, 2003; Weinzimmer, et al., 1998). In addition) sales growth and employment growth respond differently to a wide variety of criteria (Baum et al., 2001; Delmar et al., 2003). In this study we use transaction cost economics (Williamson, 1996) as a theoretical base to examine transaction cost influences on the addition of new employees as emerging ventures experience sales growth. \\le theorize that transaction cost economics variables will moderate the relationship between sales growth and employment growth. W'e develop and test hypotheses related to asset specificity, behavioral uncertainty, and the influence of resource munificence on the strength of the sales growth/ employment growth relationship. Asset specificity is theorized to be a positive moderator of the relationship between sales growth and employment growth. When the behavioral uncertainty associated with adding new employees is greater than that of outsourcing or subcontracting, it is hypothesized to be a negative moderator of the sales growth/employment growth relationship. We also hypothesize that resource scarcity will strengthen those relationships.

Analysing governance categories used on project alliances in the construction industry

In Australia, collaborative contracts, and in particular, project alliances, have been increasingly used to govern infrastructure projects. These contracts use formal and informal governance mechanisms to manage the delivery of infrastructure projects. Formal mechanisms such as financial risk sharing are specified in the contract, while informal mechanisms such as integrated teams are not. Given that the literature contains a multiplicity of often untestable definitions, this paper reports on a review of the literature to operationalize the concepts of formal and informal governance. This work is the first phase of a study that will examine the optimal balance of formal and informal governance structures. Desk-top review of leading journals in the areas of construction management and business management, as well as recent government documents and industry guidelines, was undertaken to to conceptualise and operationalize formal and informal governance mechanisms. The study primarily draws on transaction-cost economics (e.g. Williamson 1979; Williamson 1991), relational contract theory (Feinman 2000; Macneil 2000) and social psychology theory (e.g. Gulati 1995). Content analysis of the literature was undertaken to identify key governance mechanisms. Content analysis is a commonly used methodology in the social sciences area. It provides rich data through the systematic and objective review of literature (Krippendorff 2004). NVivo 9, a qualitative data analysis software package, was used to assist in this process. A previous study by the authors identified that formal governance mechanisms can be classified into seven measurable categories: (1) negotiated cost, (2) competitive cost, (3) commercial framework, (4) risk and reward sharing, (5) qualitative performance, (6) collaborative multi-party agreement, and (7) early contractor involvement. Similarly, informal governance mechanisms can be classified into four measureable categories: (1) leadership structure, (2) integrated team, (3) team workshops, and (4) joint management system. This paper explores and further defines the key operational characteristics of each mechanism category, highlighting its impact on value for money in alliance project delivery. The paper’s contribution is that it provides the basis for future research to compare the impact of a range of individual mechanisms within each category, as a means of improving the performance of construction projects.

Standard business reporting in Australia : efficiency, effectiveness, or both?

The benefits of using eXtensible Business Reporting Language (XBRL) as a business reporting standard have been widely canvassed in the extant literature, in particular, as the enabling technology for standard business reporting tools. One of the key benefits noted is the ability of standard business reporting to create significant efficiencies in the regulatory reporting process. Efficiency-driven cost reductions are highly desirable by data and report producers. However, they may not have the same potential to create long-term firm value as improved effectiveness of decision making. This study assesses the perceptions of Australian business stakeholders in relation to the benefits of the Australian standard business reporting instantiation (SBR) for financial reporting. These perceptions were drawn from interviews of persons knowledgeable in XBRL-based standard business reporting and submissions to Treasury relative to SBR reporting options. The combination of interviews and submissions permit insights into the views of various groups of stakeholders in relation to the potential benefits. In line with predictions based on a transaction-cost economics perspective, interviewees who primarily came from a data and report-producer background mentioned benefits that centre largely on asset specificity and efficiency. The interviewees who principally came from a data and report-consumer background mentioned benefits that centre on reducing decision-making uncertainty and decision-making effectiveness. The data and report consumers also took a broader view of the benefits of SBR to the financial reporting supply chain. Our research suggests that advocates of SBR have successfully promoted its efficiency benefits to potential users. However, the effectiveness benefits of SBR, for example, the decision-making benefits offered to investors via standardised reports, while becoming more broadly acknowledged, remain not a priority for all stakeholders.

Understanding Formal and Informal Governance on Infrastructure Projects - Literature Review [industry report]

In Australia, collaborative contracts have been increasingly used to govern infrastructure projects. These contracts combine formal and informal mechanisms to manage project delivery. Formal mechanisms (e.g. financial risk sharing) are specified in the contract, while informal mechanisms (e.g. integrated team) are not. The paper reports on a literature review to operationalise the concepts of formal and informal governance, as the literature contains a multiplicity of, often un-testable, definitions. This work is the first phase of a study that will examine the optimal balance of formal and informal governance structures. Desk-top review of leading journals in the areas of construction management and business management, as well as recent government documents and industry guidelines, was undertaken to to conceptualise and operatinalise formal and informal governance mechanisms. The study primarily draws on transaction-cost economics (e.g. Williamson 1979; 1991), relational contract theory (Feinman 2000; Macneil 2000) and social psychology theory (e.g. Gulati 1995). Content analysis of the literature was undertaken to identify key governance mechanisms. Content analysis is a commonly used methodology in the social sciences area. It provides rich data through the systematic and objective review of literature (Krippendorff 2004). NVivo 9, a qualitative data analysis software package, was used to assist in this process. Formal governance mechanisms were found to be usefully broken down into four measurable categories: (1) target cost arrangement (2) financial risk and reward sharing regime (3) transparent financials and (4) collaborative multi-party agreement Informal governance mechanisms were found to be usefully broken down into three measurable categories: (1) leadership structure (2) integrated team (3) joint management system We expect these categories to effectively capture the key governance drivers of outcomes on infrastructure projects. These categories will be further refined and broken down into individual governance mechanisms for assessment through a large-scale Australian survey planned for late 2012. These individual mechanisms will feature in the questionnaire that QUT will deliver to AAA in October 2012.

Corporate-cooperative management of fisheries: A potential alternative governance structure for low value small fisheries?

While the economic and environmental benefits of fisheries management are well accepted, the costs of effective management in low value fisheries, including the research necessary to underpin such management, may be considerable relative to the total economic benefits they may generate. Co-management is often seen as a panacea in low value fisheries. Increasing fisher participation increases legitimacy of management decision in the absence of detailed scientific input. However, where only a small number of operators exist, the potential benefits of co-management are negated by the high transaction cost to the individual fishers engaging in the management process. From an economic perspective, sole ownership has been identified as the management structure which can best achieve biological and economic sustainability. Moving low value fisheries with a small number of participants to a corporate-cooperative management model may come close to achieving these sole ownership benefits, with lower transaction costs. In this paper we look at the applicability of different management models with industry involvement to low value fisheries with a small number of participants. We provide an illustration as to how a fishery could be transitioned to a corporate-cooperative management model that captures the key benefits of sole management at a low cost and is consistent with societal objectives.