scholarly journals Corporate Governance and Transaction Cost Economics: A Study of the Equity Governance Structure

2014 ◽  
Author(s):  
Jimmy A. Saravia ◽  
Silvia Saravia-Matus
Keyword(s):  
Corporate Governance ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Governance Structure

scholarly journals Corporate governance and transaction cost economics: A study of the equity governance structure

2016 ◽  
Vol 12 (1) ◽  
pp. 33-44 ◽  
Author(s):  
Jimmy A. Saravia Matus ◽  
Silvia Saravia-Matus
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Governance Structure ◽  
Firm Valuation ◽  
Managerial Discretion ◽  
Full Analysis ◽  
First Time

This paper extends the Transaction Cost Economics (TCE) theory of the equity governance structure by introducing a (hitherto absent) full analysis of the key TCE issue of bilateral dependency between the firm and its shareholders. In addition, the paper discusses the implications of the analysis for the topic of corporate governance and firm performance. We find that when bilateral dependency holds contractual hazards are mitigated as predicted by TCE, but that when it does not contractual safeguards are altered to the disadvantage of shareholders and managerial discretion costs increase as reflected by lower firm valuation. Importantly, our study documents for the first time a class of transactions where business relationships persist indefinitely even though transaction costs are not minimized.

Virtual enterprise networks: the fifth element of corporate governance

2001 ◽  
Vol 20 (3) ◽  
pp. 171-188
Author(s):  
Nicholas C. Georgantzas
Keyword(s):  
Corporate Governance ◽  
System Dynamics ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Virtual Enterprise ◽  
Dynamics Simulation ◽  
Enterprise Networks ◽  
Market Uncertainty ◽  
Competitive Edge ◽  
Exchange Governance

Although still flying low under the popular business media's collective radar, virtual enterprise networks (or nets) do receive increased attention in the strategic management literature. A virtual enterprise network (VEN) is a system of autonomous firms that collaborate to achieve common business objectives. VENs give participants a competitive edge in markets demanding agility and rapid response. Seen as an emerging transactional exchange governance (TEG) form within transaction cost economics (TCE), VENs and the relations among firms that form them posit challenges for researchers and managers. VENs differ substantially from markets and hierarchies, and from recurrent and relational contracts, utterly changing what it means to be a firm in today's business. This essay explores alternative TEG forms, their characteristics and the criteria that bear on the choice of corporate governance: flexible specialization, market uncertainty, product (good or service) complexity, reliance on trust, risk, self-organization, shared knowledge, and socio-territorial cohesiveness. The essay offers propositions on the relations among economic criteria and the choice of transactional exchange governance forms by exploring the dynamics of a generic TEG structure. This is a system dynamics simulation model that partially offsets the shortcomings of transaction cost economics (TCE) and points to the potentially rich contribution of system dynamics to exploring VENs beyond the ideal-type TEG forms of markets and hierarchies that dominate the TCE literature.

scholarly journals Firms' Choice of Regulatory Instruments to Reduce Pollution: A Transaction Cost Approach

2004 ◽  
Vol 6 (3) ◽  
pp. 1-20 ◽  
Author(s):  
Magali Delmas ◽  
Alfred Marcus
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Command And Control ◽  
Governance Structure ◽  
Governance Structures ◽  
Negotiated Agreements ◽  
Regulatory Instruments ◽  
Market Opportunities ◽  
And Control

This paper compares the economic efficiency of firm-agency governance structures for pollution reduction using transaction costs economics. Two governance structures are analyzed with the transaction costs approach: command and control regulation (CCR) and negotiated agreements (NAs). We propose that the choice of governance structure depends on the strategies firms pursue given the attributes of their transactions and their market opportunities. The application of transaction cost economics analysis leads to different choices of regulatory instruments. Firms in more mature, stable industries are likely to choose command and control, while firms in new, dynamic sectors are more likely to opt for negotiated agreements. Frequency of transactions is a key factor in firm choice.

scholarly journals The Comparative Effects of Transaction Cost Economics and Resource Based View: A Technological Alliance Motivational Perspective

2016 ◽  
Vol 6 (5) ◽  
pp. 64 ◽  
Author(s):  
Hwan Jin Kim
Keyword(s):  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Governance Structure ◽  
High Tech ◽  
Resource Based View ◽  
Alliance Partner ◽  
Positive Effects ◽  
Alliance Partners ◽  
The Impact ◽  
Alliance Governance

<p>This paper examines the impact of two main alliance motivation theories, transaction cost economics (TCE) and resource based view (RBV), on alliance processes among Korean manufacturing high-tech ventures. Results show that TCE and RBV are complimentarily explaining the formation of inter-firm alliances. TCE variables are more related with alliance partner characteristics while RBV is more linked with partner capabilities. Both show positive effects on performance. No significant effect is found on determining an alliance governance structure. While selecting appropriate technological alliance partners show positive effects on performance, no significant effect is found between alliance governance structure and performance. Factors of both theories impacting each alliance stage and analytical explanations of such impacts are discussed.</p>

scholarly journals Choosing Between Safeguards: Scope and Governance Decisions in R&D Alliances

2018 ◽  
Vol 46 (3) ◽  
pp. 359-384 ◽  
Author(s):  
Constantinos S. Lioukas ◽  
Jeffrey J. Reuer
Keyword(s):  
Knowledge Sharing ◽  
Transaction Cost ◽  
Empirical Analysis ◽  
Transaction Cost Economics ◽  
Governance Structure ◽  
Theoretical Issue ◽  
Control Mechanisms ◽  
Functional Activities ◽  
Multiple Partners ◽  
Ex Post

Research on transaction cost economics has emphasized the choice of an appropriate governance structure as an important mechanism in alleviating exchange hazards in interfirm transactions, yet firms may also manipulate the characteristics of a transaction to make it less hazardous in the first place by carefully selecting the activities or assets involved in the transaction. In this paper, we explore this theoretical issue in transaction cost economics by examining how firms design R&D alliances to mitigate appropriation hazards in these interfirm transactions. In particular, we investigate when firms will prefer to limit the scope of functional activities involved in an R&D alliance, thus addressing appropriation hazards directly by manipulating the alliance’s characteristics, versus when they will opt for an equity-based governance structure in order to mitigate appropriation hazards ex post. We argue that firms are more likely to limit the scope of alliance activities rather than choose an equity-based governance structure when there are multiple partners in an alliance and when the partners are from different nations, because monitoring and other control mechanisms become more cumbersome and problematic in these circumstances. In contrast, firms that are direct competitors are more likely to choose an equity-based governance structure in order to mitigate exchange hazards, such as knowledge misappropriation, through carefully monitored knowledge sharing. Empirical analysis of data on R&D alliances in a variety of industries provides support for our arguments regarding alliances involving multiple partners and alliances between competitors. We discuss the implications of our study for research on transaction cost economics.

Trust conditional on governance structure: theory and evidence from case studies

2008 ◽  
Vol 8 (1) ◽  
pp. 33-46 ◽  
Author(s):  
Melanie Fritz ◽  
Gaetano Martino ◽  
Giulio Surci
Keyword(s):  
Case Studies ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Relationship Management ◽  
Governance Structure ◽  
Theoretical Background ◽  
Structure Theory ◽  
Supplier Relationship Management ◽  
Trust Theory ◽  
And Control

The paper proposes the idea that trust-based relationships can be established within the specific governance structures chosen by the agents. The theoretical background of this paper spans the literature from transaction cost and contract theory to supplier relationship management and trust theory. First communication and experience, risk perception attitude and the trade-off between trust and control are discussed within the analysis of trust source factors. Then these elements are considered in the light of Transaction Cost Economics. Three case studies are then presented in order to corroborate the theoretical proposition.

scholarly journals Supply Management: A Transaction Cost Economics Framework

2012 ◽  
Vol 7 (2) ◽  
pp. 139-147 ◽  
Author(s):  
Reza Mohammady Garfamy
Keyword(s):  
Economic Theory ◽  
Supply Chain ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Governance Structure ◽  
Analytical Framework ◽  
Supply Management ◽  
Vertical Coordination ◽  
Contractual Relations ◽  
Limited Scope

Abstract Transaction Cost Economics (TCE) is an economic theory that provides an analytical framework for investigating the governance structure of contractual relations within a supply chain. The purpose of this paper is to examine existing research in an effort to understand the potential effects of transaction costs on the vertical coordination of a supply chain. The paper arrives at many insights into how supply chains are organized under different governance structures. These insights can certainly be shared via the development and introduction of related propositions. The conceptual typology of contractual relations developed herein can help researchers better understand the scope of both the problems and the opportunities associated with supply management. It will be of value, therefore, not only to researchers who desire to expand their research into this area, but also to those who have already investigated this topic in isolation or with limited scope.

Government Control, Transaction Costs and Commitment Between the Hong Kong and Shanghai Banking Corporation (HSBC) and the Chinese Government

2008 ◽  
Vol 9 (1) ◽  
pp. 44-69 ◽  
Author(s):  
Qing Lu
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Governance Structure ◽  
Foreign Bank ◽  
Chinese Government ◽  
Government Control ◽  
Local Authorities ◽  
Mutual Dependency ◽  
The Government

We use the tools of transaction cost politics (TCP) developed from transaction cost economics and economic analysis, to analyze the business relationship building between the Hongkong and Shanghai Banking Corporation (HSBC), the largest and most successful foreign bank in China, and the Chinese government between 1949 and 1978. We demonstrate the value of the TCP-based approach to evaluating the specialized governance structure of commitment built on mutual dependency. In particular, we identify several transaction attributes that give rise to hazards: transaction uncertainty, the role of the government in the economy, and the strength of the supporting coalition. Our analysis also confirms that commitment built on the mutual dependency between the international company and the local authorities and between the international company's home country authorities and the local authorities did reduce the company's transaction costs by guarding against the local authorities' opportunism.

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