Constrained Entrepreneurship: An Interdisciplinary Extension of Bounded Rationality

2000 ◽  
Vol 12 (1) ◽  
pp. 71-86 ◽  
Author(s):  
Anne de Bruin ◽  
Ann Dupuis
Keyword(s):  
Social Network ◽  
Bounded Rationality ◽  
Economic Activity ◽  
Institutional Economics ◽  
Transaction Cost Economics ◽  
New Institutional Economics ◽  
Critical Examination ◽  
Atomistic Model ◽  
Interdisciplinary Framework ◽  
Orthodox View

The intention of this paper is to extend critiques of rationality that have been developed across a range of disciplines and within a number of strands of feminism. Initially providing a brief review of rationality critiques, the paper then focuses on bounded rationality, the key behavioural assumption of transaction cost economics (TCE). It is shown that, to some extent, this notion of rationality erodes the atomistic model of economic activity central to the economic orthodoxy and is therefore an improvement on the neoclassical orthodox view of rationality. The paper then moves on to a more critical examination of bounded rationality through the development of the feminist slanted concept of ‘constrained entrepreneurship’. This new conceptualisation also provides a means of extending TCE through the incorporation of the Coasian insight that the development of TCE has tended to lose sight of the raison d’être of the firm, that of ‘running a business’ (Coase, 1988a). The concept of constrained entrepreneurship offers a useful, integrative, interdisciplinary framework in which to work and provides a focus for synthesising aspects of social network analysis (a central concern of the new economic sociology) and a feminist oriented perspective, with TCE, an important strand within new institutional economics.

Altruism, reciprocity and Islamic equity finance

2016 ◽  
Vol 9 (2) ◽  
pp. 205-221 ◽  
Author(s):  
Yasushi Suzuki ◽  
Mohammad Dulal Miah
Keyword(s):  
Institutional Economics ◽  
Transaction Cost Economics ◽  
Theoretical Background ◽  
Fund Raising ◽  
New Institutional Economics ◽  
Economic Behavior ◽  
Content Type ◽  
Protection Mechanisms ◽  
Equity Finance ◽  
The Right

Purpose This paper argues how Islamic altruism and reciprocity can enhance or drain the supply of Islamic equity finance. The paper also analyzes the feasibility of Islamic equity finance through the lens of new institutional economics (NIE) and transaction cost economics (TCE). Design/methodology/approach One of the salient contributions by NIE is to support the proposition that effective contracting depends greatly on institutions in terms of “rules that constrain economic behavior”, including informal or intangible institutions, such as religion, culture and customary practices. This paper draws on the theoretical contributions of the NIE and TCE and applies some of these contributions to an analysis of general altruism and reciprocity in Islamic economies. Findings It is said that solutions based on the Islamic injunctions (collectively termed as spiritual quotient) could serve to mitigate agency risks. However, in theory, the Muslim principal (particularly fund providers) is exposed to higher agency risk unless appropriate rules of protecting the right of the principal (or of punishing the agent when its opportunistic behavior is revealed) are devised, because the Muslim fund providers have the divine obligation to share risks in enterprise under the profit-loss sharing (PLS) scheme as well as to share a portion of income with the poor or those entrepreneurs who face difficulties in fund-raising. Originality/value Many scholars refer to the lack of the “formal” institutions that hinder the sound development of Islamic venture capital (VC). This paper contributes to shedding an analytical light on the unique feature of the Muslims’ “informal” constraints which make them hesitate to invest in Islamic VC. To develop the Islamic VC market, this paper provides a theoretical background to suggest how important it would be for the national financial system to devise some tangible provisions by installing enterprise-friendly regulations as well as adequate incentive and protection mechanisms consistent with Islamic principles.

Oliver E. Williamson,

2016 ◽  
Author(s):  
Andrew B. Whitford
Keyword(s):  
Transaction Cost ◽  
Critical Analysis ◽  
Institutional Economics ◽  
Transaction Cost Economics ◽  
Antitrust Policy ◽  
New Institutional Economics ◽  
Policy Analysts ◽  
The Impact ◽  
First Time

This chapter comments on Oliver Williamson’s 1975 book,Markets and Hierarchies: Analysis and Antitrust Implications, a critical analysis of how firms operate in markets. Williamson describes a new way of understanding markets and hierarchies by using the term “New Institutional Economics” for the first time. This chapter examines Williamson’s approach and the impact of his book, first by discussing his arguments about markets and hierarchies in relation to what policy analysts sometimes call “the politics of ideas”. It then considers Williamson’s particular interest in antitrust policy as well as his thesis about transaction cost economics. Finally, it evaluates the implications of Williamson’s research for the long-term development of a politics of ideas about firms in markets.

Understanding International Business Negotiation Behavior: Credible Commitments, Dispute Resolution, and the Role of Institutions

2016 ◽  
Vol 21 (1) ◽  
pp. 165-198 ◽  
Author(s):  
Yue Wang ◽  
Karen Yuan Wang ◽  
Xufei Ma
Keyword(s):  
Dispute Resolution ◽  
International Business ◽  
Institutional Economics ◽  
Transaction Cost Economics ◽  
New Institutional Economics ◽  
Credible Commitments ◽  
Business Negotiation ◽  
Negotiation Behavior ◽  
Theoretical Perspectives ◽  
Ex Post

Developed mainly in the broad field of negotiation, the existing literature on international business negotiation has adopted theoretical perspectives that focus on differences between negotiating parties. In this article, we argue that opportunism is more fundamental than differences in our understanding of international business negotiation behavior. Parties’ concerns over how to mitigate opportunism are the fundamental force that drives such negotiation behavior, and the likelihood of opportunism is affected mostly by the economic nature of the asset parties committed to the business exchange. By synthesizing transaction cost economics and new institutional economics, this paper develops an alternative theoretical model that complements the existing negotiation literature to explain negotiation behavior. Our model theorizes relationships between parties’ ex-ante credible commitments and ex-post dispute resolution strategies and explores how institutions moderate such relationships in shaping international business negotiation behavior and process.

scholarly journals THEORY OF CONTRACTS IN THE LIGHT OF NEW INSTITUTIONAL ECONOMICS. THE SPECIFICITY OF AGRICULTURAL CONTRACTS

2018 ◽  
Vol 17 (4) ◽  
pp. 97-104
Author(s):  
Marzena Lemanowicz
Keyword(s):  
Economic Theory ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Institutional Economics ◽  
Agricultural Sector ◽  
Transaction Cost Economics ◽  
New Institutional Economics ◽  
Economic Literature ◽  
Contract Signing

The article reviews Polish and foreign economic literature regarding new institutional economics (NIE) and various research approaches used in the framework of NIE. Particular attention was paid to the economic theory of contracts and the transaction costs, as the limitation of transaction costs is indeed the main stimulus for contract signing. Special attention was given to agricultural contracts and their specificity. The article discusses different theories applied in the analysis of contracts, characterizes contracts according to different criteria, and draws attention to the importance of transaction costs in the theory of contracts. In addition, factors which contribute to these costs have been identified, indicating the necessity of adapting the principles of transaction cost economics to the needs of the agricultural sector.

Can an unwilling horse be made drink?

2011 ◽  
Vol 7 (4) ◽  
pp. 511-516 ◽  
Author(s):  
YOUNG BACK CHOI
Keyword(s):  
Economic Development ◽  
Institutional Economics ◽  
Developed Countries ◽  
New Institutional Economics ◽  
Development Theory ◽  
Critical Examination ◽  
Economic Democracy ◽  
Least Developed Countries ◽  
Push Down ◽  
Economic Development Theory

Abstract:In his critique of the newer approach in economic development emphasizing institutional reforms, Ha-Joon Chang, in his article titled ‘Institutions and Economic Development: Theory, Policy and History’, equates New Institutional Economics with the program of liberal reforms for least developed countries (LDCs) and blames the former for the alleged failure of the latter. He argues with some justice that the dominant discourse in New Institutional Economics insufficiently appreciates the complexity of institutions; as a consequence, the difficulty of transplanting institutions is largely discounted. His case, however, is marred by his attempt to push down his ideological biases by marshalling inchoate, highly questionable and often contradictory ideas as facts. Going beyond a critical examination of the New Institutional Economics inspired discourse in development economics, he advocates his own version of beneficial development policies for LDCs – namely, economic democracy and industrial policies. His proposals are not only highly questionable, but they amount to adopting a double standard of exempting himself from the very criticisms he levies against New Institutional Economics – ignoring the difficulty of importing foreign institutions. Presuming to play God, like many development economists, he ignores the essential fact that an unwilling horse cannot be made to drink.

Introduction

2016 ◽  
Author(s):  
Adam Teller
Keyword(s):  
Eighteenth Century ◽  
Social Status ◽  
Economic Activity ◽  
Economic History ◽  
Institutional Economics ◽  
Cultural Factors ◽  
New Institutional Economics ◽  
Financial Success ◽  
The Family ◽  
History Of

The book makes three main interventions. First is the use of Jewish economic history to understand both the development of Jewish society and its relations with the surrounding world. The methodology of New institutional economics, emphasizing the connection between economic and cultural factors, is employed. Second is the study of the Jews’ economic roles in the specific context of magnate estates in eighteenth-century Poland-Lithuania. In this late feudal setting, Jews achieved enormous financial success, which they translated into improved social status and even power. This process is at the heart of the analysis here. Third is the history of the Radziwiłł family and its estates in Lithuania. From a low point at the beginning of the period, the family reached the pinnacle of its power at the end. This rise was based on increased estate incomes, the importance for which of Jewish economic activity is examined here.

Money, Power, and Influence in Eighteenth-Century Lithuania

2016 ◽  
Author(s):  
Adam Teller
Keyword(s):  
Eighteenth Century ◽  
Economic Activity ◽  
Institutional Economics ◽  
New Institutional Economics ◽  
Capitalist System ◽  
System A ◽  
System P ◽  
Archival Record ◽  
The Rich ◽  
Formed Part

This study demonstrates how Jewish economic activity on the magnate estates in the eighteenth-century Polish-Lithuanian Commonwealth enriched, empowered, and reshaped Jewish—and Polish-Lithuanian—society. The analysis follows the New institutional economics (NIE) approach to detail Jews’ roles in the estates’ economic institutions—especially the markets, often overlooked in studying the feudal economy. It examines the economic roles played by Jews on the estates of the Radziwiłł magnate dynasty. This was a late feudal economy, so its study demonstrates how Jews formed part of a pre-capitalist system—a highly beneficial setting for them. Jewish businessmen formed the majority of merchants on the estates and also dominated the leasing of the monopoly on alcohol sales—a crucial way of marketing surplus grain. This economic niche became an ethnic economy, giving Jews market superiority. Their social status improved dramatically since they enjoyed Radziwiłł support and acted as their unofficial agents in various contexts. A new Jewish socioeconomic elite appeared, wielding power and authority over all groups on the estates. Based on the rich archival record, the study focuses on the Radziwiłł family’s Lithuanian holdings, the heart of its estates. It shows that the Jews’ integration into the estate economy was at the family’s invitation, in order to increase revenues. The Jews’ success in doing this allowed the Radziwiłłs, like similar magnate families, to become the most powerful force in Poland-Lithuania. Jewish economic activity, therefore, helped shape the Commonwealth’s eighteenth-century political system.

New Institutional Economics

2020 ◽  
pp. 102-124
Author(s):  
Barak Richman
Keyword(s):  
Twentieth Century ◽  
Transaction Cost ◽  
Real World ◽  
Institutional Economics ◽  
Transaction Cost Economics ◽  
New Institutional Economics ◽  
Production Functions ◽  
Governance Structures ◽  
Intellectual Traditions ◽  
Micro Level

This chapter assesses New Institutional Economics (NIE). It begins by describing the author’s own understanding of the New Private Law (NPL). The chapter then provides a brief introduction to NIE and its intersection with the study of legal doctrines and institutions. NIE’s roots extend—at least—to Ronald Coase’s famous 1937 article, “The Nature of the Firm,” and more likely to the writings of nineteenth- and early twentieth-century political economists. These intellectual traditions have shaped what is now known as NIE into two distinct branches. The first branch examines institutions as “humanly designed constraints that structure political, social, and economic interactions.” The second branch of NIE focuses on more micro-level behavior. Called “the governance branch” and operationalized by transaction cost economics, the foundational idea is to describe firms not in neoclassical terms as production functions, but in organizational terms as governance structures. The chapter explains how both NPL and NIE exhibit the hallmarks of interdisciplinary, scholarly pluralism, and an inquisitive focus on real-world, tractable problems. It concludes with some thoughts about the future of NPL and, in particular, the lessons it can take from NIE’s successes.

scholarly journals New Institutional Economics: Complementary Aspects

2014 ◽  
Vol 13 (1) ◽  
pp. 93-108
Author(s):  
Cleiciele Albuquerque Augusto ◽  
José Paulo Souza ◽  
Silvio Antonio Ferraz Cario
Keyword(s):  
Property Rights ◽  
Institutional Economics ◽  
Transaction Cost Economics ◽  
New Institutional Economics ◽  
Resource Based View ◽  
Descriptive Research ◽  
Strategic Resources ◽  
Theoretical Assumptions ◽  
The Relationship ◽  
Theoretical Issues

The purpose of this article was to understand how the theoretical assumptions of the micro analytical level of New Institutional Economics (NIE), encompassing the Resource-Based View (RBV), the Transaction Cost Economics (TCE), and associated to the Economic Costs Measurement (ECM), might influence the choice of governance structures of companies. The method used was a literature review and descriptive research. Parallel to these theories, the RBV approach was chosen in order to discuss the relationship with the boundaries of the firm, and to identify the complementary aspects between these theoretical issues. The results showed that, when these approaches are considered together, it is evident that the possession and maintenance of strategic resources (VBR) characterizes property rights that need to be protected by legal mechanisms (ECT and ECM), able to minimize their loss of value, and secure property rights. Ultimately, the sustainability of a competitive advantage will be through structures that consider the presence of specific assets (ECT), measurability (ECM), and condition for competitiveness (VBR).

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