How A Social Enterprise Wanes: The Transaction Costs of Credible Commitments at Etsy.com

This article fathoms how a social enterprise wanes by applying the construct of imperative credible commitments from transaction cost economics to the case of Etsy.com, an online marketplace created to connect artisans and craftwork enthusiasts. In the absence of imperative credible commitments, Etsy’s social mission was bound to change, leaving the company’s major stakeholders without safeguards to protect the perpetuation of the transactions that Etsy was created to serve. The construct of credible commitments has proved to be fertile in understanding issues of political and economic transition, yet its relevance to puzzle out the corporate world has been underestimated. To bridge this gap, we have recourse to the analogy between disabling the discretion of monarchs and executives to prevent them from reneging on commitments. Hence, by building on political economy academics’ attention is drawn to strategies that, despite existing in the corporate world, have rarely been perceived as important by management and economics scholars.

Enhanced self-regulation: The case of Facebook’s content governance

Content regulation on digital platforms has become a contested issue on the public and scholarly agendas. To understand how digital platform providers experiment with making commitments regarding their regulation, this article process-traces Facebook’s content regulation to ask how it self-regulates despite constant pressures for policy intervention. The first part of the article shows how Facebook moved from its initial “thin” self-regulatory regime toward what I call “enhanced self-regulation,” which relies on first-party and independent third-party intermediaries. Thereafter, I show how Facebook self-regulated the balance between public and private interests over time and across the regimes. The findings suggest that powerful actors such as Facebook can innovate in self-regulation by reallocating content-related responsibilities to intermediaries and subsequently create polycentric governance regimes. Lessons about how self-regulators that face public criticism can make more credible commitments to public interests are then drawn from the strengths and weakness of enhanced self-regulation.

Regulatory contract usage in case of antitrust mergers and acquisitions control

The article provides an analysis of counterparties’ benefits and costs within the framework of regulatory contracts the object of which is structural prescriptions issued by the antimonopoly authority controlling mergers and acquisitions. The purpose of the study is to identify discrete institutional alternatives for creating credible commitments in regulatory contracts with the participation of the monitoring trustee (taking into account the risk of distorted incentives).The object of the study is the regulatory contract between the regulator, the trustee, and the company (merger participant) in the case of divestiture, since this situation is the most sensitive in terms of setting incentives and risks of opportunism. The subject of the study is credible commitments in such regulatory contracts. The analysis is based on methods of new institutional economics and of law and economics, and it employs mathematical modeling. The comparative analysis of discrete institutional alternatives is used as the main methodological approach, and it is based on an analysis of action coordination forms and harmonization of economic agents’ expectations — in this case, the antimonopoly agency, a trustee, and companies involved in mergers and acquisitions transactions. Advantages and disadvantages of the following contracting options were identified: independent monitoring by the regulator;monitoring with the involvement of a trustee whose activities are financed by the competition authority or the company; a hybrid approach financing trustee activities; distribution of income from penalties as a way for financing trustee activities; and a system of pledges in a tripartite contract. The article also defines the conditions for credible commitments within the framework of regulatory contracts. The results of this research can be used as a guideline for institutional design in the Russian antitrust enforcement system.

Ordinary Patterns in an Extraordinary Crisis: How International Relations Makes Sense of the COVID-19 Pandemic

The customary prescription for handling “problems without passports” is to work through international intergovernmental organizations (IGOs), act collectively for humanity's future, and build up specialized knowledge. But around the world, patterns from the initial months of the COVID-19 pandemic defied the prescription. IGOs were blamed, narrow or short-term interests were prioritized, and divided reactions to experts were on display. International Relations (IR) scholarship helps explain why: (1) research on bureaucracy and institutional design examines the challenge of making IGOs accountable to member-states but also insulated from them; (2) research on delegation and socialization explores commonplace problems involving time-inconsistency and credible commitments; and (3) research on epistemic communities and anti-elitism describes the rationale and fears of permitting public policy to be guided by unelected experts. The initial months of the COVID-19 pandemic reflect how the world can look when it lacks resolute leadership to overcome commonplace aversions to IGOs, to broader or longer-term interests, and to experts. Yet while IR scholarship makes sense of these patterns, it does not say enough about why resolute leadership wanes, or what to do about IGO performance when it does. Answers to such questions are crucial not only for recovering from the COVID-19 crisis, but for dealing with whatever global crises lie ahead.

Trust and Sharing Platforms

The digital economy and sharing platforms generate new types of mechanisms, ensuring credible commitments. Transparency and bilateral rating systems for both consumers and producers constrain opportunistic behavior, thus creating trust. The main hypothesis is that sharing companies and platforms act as a substitute for institutional trust. Country- level data analysis shows that there is a negative correlation between the sharing economy index and institutional trust and a positive correlation between the sharing economy index and institutional quality. The findings support the idea that as sharing companies can compensate for the lack of institutional trust and stimulate economic transactions, they are especially useful in the countries with a low level of trust.

Signals, strongholds, and support: Political party protests in South Africa

South African politics are in a period of transition: the dominant African National Congress (ANC) is in decline, support for opposition parties has been rising, and voters have been disengaging rapidly from the electoral process. As protest movements have become more common and more powerful, established political parties have increasingly led their own protests, often addressing the same issues that citizens rise up about. This phenomenon has been understudied but has important ramifications for the future of South African politics. This article addresses this gap in the literature, arguing that party-led protests can be interpreted as costly signals of credible commitments to address the very issues that citizens are upset about. In a time when established parties are losing support, they may turn to these costly protests to demonstrate their commitment to addressing the needs of the people. Using counts of party-led protests and riots as well as election outcomes in the 2004, 2009, 2014, and 2019 national elections, this article demonstrates that party-led protests primarily target stronghold municipalities. In doing so, they positively correlate with vote-shares during elections. This boon accrues primarily to the opposition parties, but not the incumbent ANC.

Alleviating concerns of misappropriation in corporate venture capital: Creating credible commitments and calculative trust

Ventures are often hesitant to accept corporate venture capital due to concerns of intellectual property misappropriation. This is likely to be especially true with startup stage ventures operating in weak intellectual property rights regimes. Drawing on transaction costs economics and game theory, we examine how corporate investors might alleviate concerns of misappropriation by establishing credible commitments to their corporate venture capital program, which discourages opportunistic behavior. We submit that corporate investors can demonstrate credible commitments through prior investment quantity and prior investment continuity, therefore increasing the chances of forming a corporate venture capital–venture investment relationship. Our findings—using data from 11,136 ventures, 300 corporate venture capital investors, and 1782 investments across 18 years—demonstrate that ventures are more likely to pair with corporate venture capital investors that have made a credible commitment to their corporate venture capital program. Also, we find evidence that both quantity and continuity possess an enhanced effect on alleviating fears of misappropriation when a startup venture operates in the same industry as a potential corporate venture capital partner; this is because the corporate venture capital investor possesses both the absorptive capacity to understand the venture’s intellectual property and complementary capabilities to beat them to market.

Fully-automated liberalism? Blockchain technology and international cooperation in an anarchic world

A recent wave of scholarship attests that the liberal world order is under threat. Although there is disagreement about the underlying reasons for this diagnosis, there are few attempts to further our understanding of how the liberal order can be reinvigorated. This paper probes the potential of blockchain technology to promote international cooperation. Blockchain technology is a data structure that enables global governance stakeholders to establish decentralized governance systems which provide high-powered incentives for enhanced cooperation. By outlining the contours of a blockchain-based global governance system for climate policy, the paper illustrates that blockchain technology holds theoretical promise to foster cooperation in three ways: leveraging new sources of information through blockchain-based prediction markets; allaying coordinating problems through reducing the cost of transactions for side payments; and allowing states and other global governance actors to make more credible commitments given guaranteed execution of blockchain-enabled smart contracts. By empowering local knowledge holders and non-state actors that traditionally lacked the means to coordinate efforts to influence global politics, blockchain technology also promises to advance an international order based on liberal values. In actuality, however, emerging blockchain-based global governance systems will fall short of the libertarian ideal of ‘fully-automated liberalism’ as their design and operation will remain under the shadow of power.