Market frictions as building blocks of an organizational economics approach to strategic management

This paper shows that market frictions are fundamental building blocks for an organizational economics approach to strategic management. Various organizational economic approaches (transaction costs, property rights, real options, and resource‐based) have distinctive focal problems and emphasize different combinations of market frictions. A wider recognition of the role of market frictions is useful for three main objectives. First, it helps identify an evolving market‐frictions paradigm in strategic management. Second, it shows how two primary questions in strategy of why firms exist and why some firms outperform others and the three primary strategic goals of cost minimization, value creation, and value capture can be better joined and evaluated. Third, different combinations of market frictions can generate new research questions and advance theory development in the strategic management field. Copyright © 2013 John Wiley & Sons, Ltd.     

Critical resource: An institutional economics of the Internet addressing-routing space

This paper links the analysis of IP address policy to the established vocabulary and concepts of institutional economics. Internet addressing and routing are usually discussed in technical terms, yet embedded in this highly technical discourse are a number of critical economic concepts, such as scarcity, externalities, common pool resources, tragedy of the commons, and conflict over the distribution of costs. To solve these problems, governance institutions native to the Internet have evolved. Yet despite the centrality of addressing and routing to Internet governance, there is very little research literature that bridges economic, institutional and technical discussions of IP addressing and routing. This paper connects the techno-economic discussion to analysis of institutions and governance arrangements.     

Intellectual property rights: An international economics perspective

This paper considers the enforcement of intellectual property rights in an international setting. I consider some of the traditional problems associated with protection of such rights in a closed economy and discuss complications added by an international dimension. Globally-optimal and nationally-optimal policies are compared. A simple model of policy choices is derived and optimal tax/subsidy and rights enforcement policies demonstrated. The paper concludes with a brief discussion of the current U.S. approach of discriminatory treatment on the basis of the national origin of an infringing product and argues that it is inferior to subsidies for providing incentives for R&D and to tariffs for shifting profits to U.S. firms.I am grateful to Marius Schwartz for helpful comments on earlier drafts of this paper. Any remaining errors are, of course, my own.     

Executive preferences for governance modes and exchange partners: An information economics perspective

This study investigates how executives address information asymmetry and adverse selection surrounding international joint ventures (IJVs) and acquisitions. We argue that executives can address such exchange hazards not only through their governance decisions, as prior research indicates, but also through their selection of exchange partners. Our experimental design complements prior research on firms' governance choices in three ways: (1) by incorporating multiple potential exchange partners rather than taking a single partner as given for a realized transaction; (2) by accommodating multiple potential entry modes to address interdependencies across governance structures; and (3) by providing direct evidence on executives' assessments of IJVs and acquisitions. We join together organizational governance research and decision‐making research on IJV partner selection, two literatures that have largely developed separately. Copyright © 2013 John Wiley & Sons, Ltd.     

Optimization of the machining economics problem under the failure replacement strategy

This paper presents a model for calculating the optimal cutting feed rate and spindle speed in a stand-alone cutting machine. The optimal cutting conditions are determined for three different objective functions—minimum expected cycle time, minimum expected cost per unit, and maximum expected profit-rate—under the failure replacement strategy, taking into account cutting tool constraints and machine limitations. We also examine the relationships between the optimal solutions, and present the efficiency range of feed rate.     

Fields of opportunity: How marketers design the transaction game with transaction field maps

While the importance of transaction institutions, or rules, has long been established in the area of marketing governance, marketers and academics alike would benefit from guidance in the strategic use of the rules of the transaction game. This is particularly important in B2B and industrial markets where innovations in the rule-making environment have a significant effect on innovation. Strategically, the organization achieves its customer objectives by creating arenas for transacting, termed transaction fields, in which social actors transact. The fundamental argument is that organizations create transaction fields to depict the benefits of transacting to customers. Accordingly, managers must focus on strategic transactions; those that fundamentally change the way that transacting takes place in the transaction field. Using a historical case of the American cotton factor, this research demonstrates how marketers overcome factors that limit transacting by mapping their actions in transaction fields using rules. This specialization may result in the emergence of marketing intermediaries and lead to competitive advantage.     

Agglomeration and the choice between acquisitions and alliances: An information economics perspective

Research summary : This research extends agglomeration theory by joining it with information economics research to better understand the determinants of firms' organizational governance choices. We argue that co‐location in a common geographic cluster fosters lower levels of information asymmetry between exchange partners and thus leads firms to employ acquisitions rather than alliances for their external corporate development activities. We further extend agglomeration theory by arguing that the impact of sharing a cluster location on acquisitions versus alliances strengthens with the level and dissimilarity of the exchange partners' knowledge‐based resources as well as with the intra‐cluster geographic proximity of the partners. Evidence from a sample of over 1,100 alliance and acquisition transactions in the U.S. semiconductor industry provides support for our hypotheses. Managerial summary : This paper investigates the role of geographical clustering for firms' external corporate development activities in acquisitions and alliances. We explain how better information is likely to be available among firms co‐located in the same cluster. This suggests that managers should have less need to use alliances over acquisitions as a means of reducing the risk of adverse selection (e.g., overpaying for acquisitions). Our investigation of over 1,100 transactions in the U.S. semiconductor industry shows that common cluster co‐location increases the probability of acquisition relative to alliance. Our arguments and evidence also indicate that the information‐related benefits of cluster co‐location are even more impactful when the parties have more divergent technology bases, possess larger stocks of knowledge‐based resources, or are located in closer geographic proximity. Copyright © 2015 John Wiley & Sons, Ltd.     

A systematic assessment of the empirical support for transaction cost economics

Transaction cost economics (TCE) is one of the leading perspectives in management and organizational studies, yet debate continues regarding its empirical support. In this paper, we take stock of the large body of extant research and provide a systematic assessment of empirical evidence. In all, 308 statistical tests from 63 articles, selected according to a set of clear criteria, were examined across various dimensions. We assess not only the level of empirical support for the theory, but also the degree of paradigm consensus present in the empirical literature. Our analysis shows that results are mixed: while we found support in some areas (e.g., with regard to asset specificity), we also found considerable disagreement on how to operationalize some of TCE's central constructs and propositions, and relatively low levels of empirical support in other core areas (e.g., surrounding uncertainty and performance). We conclude that a more thorough empirical grounding of the theory's foundation is crucial to its future development, and offer several strategies for doing this. Copyright © 2003 John Wiley & Sons, Ltd.     

Behavioral assumptions and theory development: the case of transaction cost economics

From a critical realist perspective, I discuss the role played by behavioral assumptions in organization theories, and use transaction cost economics as an illustrative example. Core behavioral assumptions often constitute the foundation of the mechanismic explanations of a theory, and thus should play a pivotal role in theory development. I distinguish between assumption‐based and assumption‐omitted theory testing, and show that empirical research in transaction cost economics has been dominated by assumption‐omitted testing. To establish a solid foundation for a new theory, management researchers should pay more attention to assumption‐based testing. Copyright © 2006 John Wiley & Sons, Ltd.     

Long-term sustainability of third-party facilitated market linkages: Evidence from the USDA marketing assistance program in the Armenian dairy industry

Public–private partnerships are increasingly seen as an important tool to build agri-food supply chains and develop markets for agri-food products in emerging economies. However, many of these initiatives fail when the public component of the program ends. One exception is the USDA Market Assistance Program (MAP) that facilitated the redevelopment of the Armenian dairy sector after privatization. This paper presents a case study of this initiative and hypothesize that the USDA MAP facilitated farmer investment in private enforcement capital. This investment resulted in sustainable market relationships between farmers and dairy processors even after the USDA MAP expired. We find empirical evidence to support this hypothesis using a panel dataset collected from 172 Armenian dairy farmers in 2004 and 2009.     

Explaining interfirm cooperation and performance: toward a reconciliation of predictions from the resource‐based view and organizational economics

Interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations. Broadly speaking, the resource‐based view suggests that firms seek to capitalize on and increase their capabilities and endowments, whereas organizational economics asserts that firms focus on minimizing the costs of organizing. Although these perspectives agree on managers’ likely actions in many areas, their predictions diverge when interfirm cooperation is considered. We take a step toward reconciling these differences by positing that firms place resource‐based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation. We examined this prediction using data from 94 publicly held restaurant chains. The results support our integrated view, but also suggest that giving primacy to resource concerns detracts from the performance of some firms. We derive several implications of these findings in an effort to guide subsequent inquiry. Copyright © 1999 John Wiley & Sons, Ltd.     

The impact of empirical tests of transaction cost economics on the debate on the nature of the firm

Transaction cost economics (TCE), as developed and operationalized by Oliver Williamson, is one of the most prominent and influential developments in the social sciences. In recent years, on the basis of many empirical studies, it has been claimed that the evidence has corroborated TCE. If so, this would have major implications for the debate between TCE and other approaches to understanding the nature of the firm. In this paper we submit the most prominent TCE empirical work to critical scrutiny, on the basis of the standards and predictions in Williamson's own writings. We find a much more mixed picture, with few studies giving unambiguous support to Williamson's TCE. Furthermore, a significant number of the studies can be reinterpreted in terms of a competence or capabilities approach. We conclude that the empirical evidence does not decisively support Williamson's TCE and we stress the importance of an empirical program of joint testing of rival theoretical approaches. Copyright © 2006 John Wiley & Sons, Ltd.     

“穷人经济学“的矿权解读:矿难生成的利益博弈

基于“穷人经济学”的矿业发展新命题,必须就矿难生成的利益博弈,寻求国家与集体与个人、中央与地方、矿主与政府部门和官员之间的合理均衡,有效维护矿工的生命权。     

Exploring how regulators face platform business issues in the lifecycle stages: Evidence of iranian ride-hailing platform business

The emergence of Platform Businesses (PBs) has caused a conflict between the traditional and new economic actors. Furthermore, it has escalated to government bodies with different beliefs and formed diverse coalitions, including among government bodies. Therefore, governments, given their regulatory and supportive roles, should be able to intervene at the right time with practical tools and trade off their internal conflicts. This paper uses an exploratory-abductive approach to identify the challenges of the regulation during the lifecycle of PBs, explores the conflicts of interest among economic actors, examines the government intervention in the economy, and explains the regulatory and supportive roles of the government. Data was collected through semi-structured interviews with PB experts, who have active roles in the regulatory process, and with well-known academics on the subject. Reviewing the pathways of PBs in Iran between 2014 and 2018, the paper suggests five propositions using regulation economics and advocacy coalition framework to develop the regulatory roles of government. The results demonstrate that PBs’ lifecycle, shifting from one-sided to two-sided market, moving from ownership to accessibility, and timing of intervention significantly support the development of Cognitive Tools, Regulation Frameworks, and Regulation Tools.     

Innovation: A data-driven approach

A newly introduced product or service becomes an innovation after it has been proven in the market. No one likes the fact that market failures of products and services are much more common than commercial successes. A data-driven approach to innovation is proposed. It is a natural extension of the system of customer requirements in terms of their number and type and the ways of collecting and processing them. The ideas introduced in this paper are applicable to the evaluation of the innovativeness of planned introductions of design changes and design of new products and services. In fact, blends of products and services could be the most promising way of bringing innovations to the market. The most important toll gates of innovation are the generation of new ideas and their evaluation. People have limited ability to generate and evaluate a large number of potential innovation alternatives. The proposed approach is intended to evaluate many alternatives from a market perspective.     

Offshore outsourcing of services: An evolutionary perspective

Offshore outsourcing is gaining increasing importance and attention in both theory and practice. The purpose of this research is to use nine in-depth case studies to analyze the evolution of offshore services outsourcing with regard to how expectations and governance structures change over time. Five testable propositions are presented, building on institutional theory, transaction cost, and resource-based perspectives. The cases demonstrate that offshore outsourcing is initiated because of increasing internal and external pressure to conform and reduce costs. Moreover, companies “chase” efficiency improvements in other geographic locations. But after reducing costs, companies discover more strategic benefits such as the potential to increase quality and market share. Importantly, as buyer–supplier relationships move from tactical to more strategic, expectations and governance structures change.     

Mobile phones,the Internet and the institutional environment

This paper empirically investigates the determinants of the Internet and cellular phone penetration levels in a cross-country setting. It offers a framework to explain differences in the use of information and communication technologies in terms of differences in the institutional environment and the resulting investment climate. Using three measures of the quality of the investment climate, Internet access is shown to depend strongly on the country's institutional setting because fixed-line Internet investment is characterized by a high risk of state expropriation, given its considerable asset specificity. Mobile phone networks, on the other hand, are built on less site-specific, re-deployable modules, which make this technology less dependent on institutional characteristics. It is speculated that the existence of telecommunications technology that is less sensitive to the parameters of the institutional environment and, in particular, to poor investment protection provides an opportunity for better understanding of the constraints and prospects for economic development.     

Picture this: Managed change and resistance in business network settings

This paper discusses change management in networks. The literature on business networks tends to downplay the role of managerial initiative in network change. The change management literature addresses such initiative, but with its single-firm perspective it overlooks the interdependence of network actors. In exploring the void between these two streams of literature, we deploy the concept of network pictures to discuss managed change in network settings. We analyze a change project from the furniture industry and address the consequences of attempting to manage change activities in a network context characterized by limited managerial authority over these activities. Our analysis suggests that change efforts unfold as a negotiated process during which the change project is re-negotiated to fit the multiple actor constituencies. The degree of overlap in the co-existing network pictures of the involved actors is found to be decisive for the possibility of successfully implementing network change.     

Mainframes and mandarins: The impact of internet use on institutional trust in East Asia

The roles of contextual determinants such as culture and political regime in existing studies of Internet use and institutional trust remain underexplored. Adopting a cultural-institutional perspective, we ask: How does Internet use relate to institutional trust? Under what conditions is the impact of Internet use on institutional trust most potent? Do authoritarian orientation and perceived institutional responsiveness mediate the relationship? Is this mediating process moderated by the degree of democratic freedom? A total of 20,667 respondents from 14 East Asian countries/territories completed questionnaires. Our results show that the indirect effect of Internet use on institutional trust via authoritarian orientation was stronger for countries/territories with a low degree of democratic freedom, while the indirect effect of Internet use on institutional trust via perceived institutional responsiveness was stronger for countries/territories with a higher degree of democratic freedom.     

Food policy and the new home economics

The author summarizes the basic structure of the new home economics and makes a comparison with the standard economics of the consumer. He develops a measure of the quantitative importance of home production activities based on data from several studies of time allocation and on detailed data from a recent Philippine study The implications of the new home economics for leisure, work, food supply, family size, education health and food policy are discussed.