the private and social costs of planning delay this paper examines planning delay and identifies the difficulty in establishing an appropriate definition and measure of delay it then outlines an economic framework for the analysis of delay costs distinguishing between private costs and the various elements of social cost it shows that the costs of delay are contingent upon the restrictiveness of planning and should be assessed in relation to the benefits of planning control available estimates of delay cost are identified but are shown to be deficient even as measures of the private cost of delay various suggestions are made for the improvement of existing approaches but it is concluded that the assessment of private and social delay costs requires case study research which distinguishes between property sectors locations and different points in the cycle of property development

technology and transaction cost economics a reply abstract i argue here as i have previously that technology is neither fully determinative of nor irrelevant to economic organization transaction cost economizing occupies a prominent position in any effort to assess the efficacy of alternative forms of economic organization

sustainable corporate finance this paper presents and illustrates the concept of sustainable corporate finance sustainability is a well established concept in the disciplines of environmental economics and business ethics the paper uses a broader definition of what is called the firm to pinpoint sustainability to the finance literature the concept of sustainable finance is compared to traditional and behavioral finance four criteria are used to systematically analyze the basic differences first on the order is the theory of the firm the definition of the firm is reconsidered by integrating behavioral aspects and by expanding financial analysis to a three dimensional goal setting secondly a closer look is taken at the assumed behavior of economic agents and its consequences for the applied methodology the shareholders paradigm is discussed against the background of growing stakeholder importance finally the fourth criterion deals with the different ethical framework and its implication for financial behavior

planning delay and the responsiveness of english housing supply there is growing international interest in the impact of regulatory controls on the supply of housing most research focuses on the supply impacts of prescribed limits on land use but housing supply may also be affected by the process of planning monitoring and approval but this is hard to measure in detail the uk has a particularly restrictive planning regime and a detailed and uncertain process of development control linked to it but does offer the opportunity of detailed site based investigation of planning delay this paper presents the findings of empirical research on the time taken to gain planning permission for selected recent major housing projects in southern england the scale of delay found was far greater than is indicated by average official data measuring the extent to which local authorities meet planning delay targets hedonic modelling indicated that there is considerable variation in the time it takes local authorities to process planning applications housing association developments are processed more quickly than those of large developers and small sites appear to be particularly time intensive these results suggest that delays in development control may be a significant contributory factor to the low responsiveness of uk housing supply to upturns in market activity

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

buyer supplier interaction asset specificity and product choice abstract firms often differentiate their products through the use of inputs that are differentiated or specialized the goal of this paper is to explore how the demand for specific investments may affect product variety in a bilateral duopolistic industry i develop a model where the degree of specificity of investments is endogenously determined through the product choices of both downstream buyers and upstream suppliers of inputs the existence of non contractible investments results in the emergence of a single supplier of a non specialized input however as the importance of having specific inputs increases fully specialized suppliers may emerge the buyers choose to increase their own competition by producing more similar products only in cases when the inputs are non specialized they do so to increase the investment incentives of the suppliers

beyond the bounded instrumentality in current corporate sustainability research toward an inclusive notion of profitability we argue that the majority of the current approaches in research on corporate sustainability are inconsistent with the notion of sustainable development by defining the notion of instrumentality in the context of corporate sustainability through three conceptual principles we show that current approaches are rooted in a bounded notion of instrumentality which establishes a systematic a priori predominance of economic organizational outcomes over environmental and social aspects we propose an inclusive notion of profitability that reflects the return on all forms of environmental social and economic capital used by a firm this inclusive notion of corporate profitability helps to redefine corporate profitability as if sustainability matters in that it overcomes the bounded instrumentality that impairs current research on corporate sustainability we apply this notion to different car manufacturers and develop conceptual implications for future research on corporate sustainability

finance as a driver of corporate social responsibility finance is grease to the economy therefore we assume that it may affect corporate social responsibility csr and the sustainability of economic development too this paper discusses the transmission mechanisms between finance and sustainability we find that there is no simple one to one relationship between financial development and sustainable development but there are various often indirect linkages it appears that most of the literature concentrates on the role of public shareholders when it comes to changing corporate policy and performance in a more sustainable direction however this focus neglects the potential impact of the credit channel and private equity on a firm s non financial policies and performance these very powerful mechanisms can govern business policies and practices therefore there appears to be much more scope for finance to promote socially and environmentally desirable activities and to discourage detrimental activities than has been acknowledged in the academic literature so far

information technology and transnational integration theory and evidence on the evolution of the modern multinational enterprise reflecting amplified hazards in cross border exchange and imperfections in markets for intangibles internalization has been central in multinational enterprise mne theory this centrality notwithstanding the fact is that internalization coheres with lower powered incentives and carries an implicit drawback namely higher realized production costs with the emergence and deployment of information and communication technology ict modern mnes are reshaping their transnational governance to address this cost the modern mne uses ict to mitigate transaction costs and evolves more to arm s length exchange to incentivize lower production costs a testable prediction is that mnes in industries more susceptible to and employing more ict will exhibit a reduced propensity for transnational integration we examine this hypothesis using available data from 1982 to 1997 for us mnes across all manufacturing sectors regression results and robustness tests are strongly congruent with the prediction this study a first to explore empirically the role of ict in the evolution of transnational exchange suggests that mne theory until now founded primarily on transaction cost economics and a cross border control theory of value capture is more likely to keep pace with developments in mne practice by opening up to incentive theories of exchange governance and a cross border coordination theory of value creation

corporate contracting for health care this paper examines the process used by fortune 500 companies to contract with health care carriers for complex and hard to observe services we confirm in part the conventional view that large companies partner with health care insurers however we show that the picture is more complex and that most of these companies do not engage in several aspects of partnering the complete nature of our data allows us to describe the distribution of company practices from tough bargaining without continuing relationships to partnering we also show that contract length can be a poor proxy for length of relationship

strategy research governance and competence perspectives business strategy is a complex subject and is usefully examined from several perspectives this paper applies the lenses of governance and competence to the study of strategy both the governance and the competence perspectives have had the benefit of distinguished antecedents they have also had to deal with tautological reputations i begin with the governance perspective with emphasis on the six key moves through which it has been operationalized i then examine the competence perspective in these same six respects governance challenges the competence perspective to apply itself more assiduously to operationalization including the need to choose and give definition to one or more units of analysis of which the routine is a promising candidate the research challenges posed by competence to which governance can and should respond include dynamic transaction costs learning and the need to push beyond generic governance to address strategy issues faced by particular firms with their distinctive strengths and disabilities a lively research future for these two perspectives individually and in combination is projected copyright 1999 john wiley sons ltd business strategy is an expansive enterprise not only do all of the functional areas in the business school relate but strategy is by nature interdisciplinary all of the social sciences especially economics and organization theory plus contract law are implicated indeed in the high technology arena where some of the most difficult strategy issues reside engineering and the law on intellectual property rights also have a bearing of the various approaches to the study of strategy this paper focuses on the governance and competence perspectives both perspectives combine economic reasoning with organization theory as between these two the governance

configuration of value chain activities the effect of pre entry capabilities transaction hazards and industry evolution on decisions to internalize we integrate insights from organizational capabilities organizational economics and industry evolution to examine industry entrants boundary choices about value chain activities and test hypotheses in 1978 2009 data from a sample of u s bioethanol producers we find support for our predictions that transaction hazards decomposed as either enduring or transient over the stages of industry evolution are positively associated with the choice to internalize value chain activities pre entry experience in an activity increases the likelihood of its internalization and reduces the effect of enduring transaction hazards on the internalization choice importantly we also distinguish between firm and founder level pre entry capabilities that is the capabilities of firms versus those of founders diversifying entrants with firm level integrative capabilities are more likely to internalize value chain activities than start ups and this effect persists over the industry s life cycle the relationship between pre entry experience with an activity and the likelihood of internalizing it is also stronger for diversifying entrants findings improve understanding of the relationships among capability development boundary choice and industry evolution

asset specificity and economic organization abstract this paper examines the optimization problem of firm and market organization in which both production cost and transaction cost differences are expressed as a function of asset specificity in general markets enjoy advantages by aggregating the demands of many buyers thereby realizing economies of scale or scope such production cost savings need to be assessed in relation to the transaction cost advantages that internal organization sometimes enjoys over markets in adapting to changed circumstances as it turns out both production cost economies and the transaction cost differences between firm and market organization vary systematically with the characteristics of the investments this paper employs a unified framework to assess the choice of organization form the condition of asset specificity is featured

the law of small numbers investigating the benefits of restricted auctions for public procurement abstracta commonly accepted view in the academic literature is that dispensing with competition may only be beneficial when tendering complex contracts however restricted auctions are frequently used among eu member states to procure small contracts in this article we investigate this paradox using an original data set of 180 contracts used by a local public buyer of social housing between 2006 and 2009 we show that limiting competition may enable economies to be made on transaction costs while the most efficient bidders still come forward and that abuses such as corruption or favouritism do not result to our knowledge this article is the first to shed light on the advantages of using restricted auctions when tendering small simple contracts

non contractible investments and vertical integration in the mexican footwear industry abstract this paper examines patterns of integration among manufacturers and retailers using data from a survey of footwear manufacturers in mexico the property rights framework developed in papers by grossman and hart 1986 j polit econ 94 691 and hart and moore 1990 j polit econ 98 1119 is differentiated from the standard empirical transactions cost framework in the context of this industry the most relevant distinction between the two frameworks is that the property rights framework addresses both the benefits and costs of integration while the transactions cost framework focuses only on variation in the benefits of integration we show that the costs of integration are highest where the retailer s non contractible investment has an important effect on the overall profits from the relationship consistent with the property rights framework the data suggest that integration is less likely in these circumstances

transaction cost economics the natural progression abstract this manuscript provides the nobel laureate s reflections on transaction cost economics the overview section frames governance as the overarching concept and transaction cost economics as the means by which to breathe operational content into governance and organization the vertical integration section identifies efficiency factors associated with determining when a firm produces a good or service to its own needs rather than outsource a discussion of the rudiments of transaction cost analysis is subsequently provided puzzles and challenges that require pushing the logic of efficient governance to completion are examined and followed by concluding remarks

housing supply investment demand and money creation a comment on the drivers of london s housing crisis this commentary examines the current emphasis on supply side solutions to the housing crisis in england building more homes to increase accessibility against a backdrop of intensifying demand side pressures the financialisation of housing and the impact of credit liberalisation and money creation on housing demand and prices it reflects on the need to balance additional housing supply where needed with gradual demand management responses that at last acknowledge the centrality of spatially unbounded investment demand and the flow of money created by deregulated banks into housing as fundamental to the current crisis of housing affordability and access

the use of management control mechanisms to mitigate moral hazard in the decision to outsource using archival data from the u s passenger airline industry this study examines whether management control mechanisms aimed at mitigating moral hazard explain outsourcing decisions over and above transaction cost economics tce determinants documented in prior research consistent with tce theory we find that in house production efficiencies and our proxy for transaction risk i e deriving from transaction infrequency transaction complexity and relationship specific investments significantly explain the extent of outsourcing of aircraft maintenance we extend tce insights to show that incentive delta i e the sensitivity of ceo portfolio holdings to stock price changes strengthens the negative association between production efficiencies and outsourcing while incentive vega i e the sensitivity of ceo holdings to stock return volatility weakens the negative association between transaction risk and outsourcing monitoring strengthens the negative association between in house production efficiencies and outsourcing but has no effect on the transaction risk outsourcing relation the results suggest that the use of outsourcing to achieve cost savings is promoted through both incentive contracts and monitoring but outsourcing to achieve the desired risk level is promoted only through incentive contracts

rabbit hutches on postage stamps planning development and political economy the supply of land for housing has been restricted by planning controls the prices of land and of houses have risen in consequence as a result land has been used with increasing intensity with infill town cramming and smaller houses on less land rabbit hutches on postage stamps a destruction of the urban environment of the many to preserve a rural environment for a few why is the supply of land restricted firstly it is suggested because the british misapprehend the degree of urbanisation in their own country secondly because rural and farming interests ensure that the planning system operates in their favour and thirdly and most importantly because the planning process is tilted in favour of the existing residents of an area who seek to preserve their environment by resisting intruders a number of suggestions are made to resolve the situation by increasing the supply of land or reducing the demand for land

land conversion at the urban fringe a comparative study of japan britain and the netherlands in the 1980s the multiplier between land values for agricultural and urban uses was found to run at 50 200 times or even higher in the areas surrounding expanding cities in japan and britain co

does transaction misalignment matter for firm survival at all stages of the industry life cycle research on industry life cycles suggests that competitive pressures are more severe during the shakeout stage which could be associated with the emergence of a dominant design than at other stages transaction cost theory on the other hand assumes generally competitive markets and does not address the industry life cycle it therefore implies that transaction cost economizing is a superior firm strategy regardless of the stage of the life cycle this paper seeks to reconcile these two streams of research by investigating whether aligning transactions with governance modes in accordance with transaction cost prescriptions has a differential effect on firm survival in preshakeout versus shakeout stages of the industry life cycle analyzing data from the early u s auto industry 1917 1933 we find that while transaction misalignment did not have a significant impact on firm survival during the preshakeout stage or during the period as a whole it did have a significantly larger negative impact on survival during the shakeout stage than during the preshakeout stage we also find that the negative effects of misalignment on survival were significantly weaker for larger firms during the shakeout stage this suggests that applications of transaction cost theory which assume uniformly severe selection pressures across the industry life cycle and uniform effects of misalignment across firms of different sizes could be misleading it also suggests that theories of the industry life cycle could usefully take transaction costs into account along with production costs in their analyses of competition over the life cycle

an architectural framework for global talent management a unique characteristic of the multinational corporation is that it comprises a geographically dispersed and culturally differentiated workforce that embodies both firm specific and location specific human capital this article takes an architectural approach to describe how different types of human capital develop from the individual level to the unit level and then to the firm level in order to build a talent portfolio for the multinational corporation depending on the company s strategy multidomestic meganational transnational different configurations of the talent portfolio tend to be emphasized and integrated to achieve competitive advantage implications for theory and practice are discussed and a research agenda is introduced

transaction costs and contractual incompleteness the case of electricite de france abstract this paper explores the incompleteness of inter firm contracts through the lens of recent developments in transaction cost economics we built a non truncated contract database representing all the relationships of electricite de france edf with its coal carriers over the period 1977 1997 we tested and corroborated most propositions derived from transaction cost theory relating contractual incompleteness to transaction characteristics even when we considered the complete set of the theory s propositions by endogeneizing the asset specificity at stake in transactions to our knowledge this kind of test has never been conducted before

integration of the sales force an empirical examination this article develops and tests a model of integration of a marketing function personal selling the model derived from transaction cost analysis as developed principally by williamson is formulated as a logistic function which is estimated with data from the electronic components industry as expected integration is associated with increasing levels of asset specificity difficulty of performance evaluation and the combination of these two factors contrary to the transaction cost model neither frequency of transactions nor interaction of specificity and environmental uncertainty is significantly related to integration the transaction cost model improves significantly upon the fit of a simple model relating integration to company size alone these results suggest that for studying transactions of this kind it is fruitful to view the firm as a governance structure

small firms in economic theory this is the fourth of a series of critical survey articles the aim of the series is to report on recent developments to provide an assessment of alternative approaches and to suggest lines of future inquiry it is intended that the articles will be accessible not only to other academic researchers but also to students and others more practically involved in the economy future survey articles will include warren samuels on institutional economics and philip arestis on post keynesian

coase spatial pricing and self organising cities modern computational techniques offer new horizons for urban economics in the form of agent based simulation frameworks this paper reports on a cellular automata ca simulation in which urban land transforms on the basis of locally optimal bargaining between developers and local communities local governments because ca is an explicitly spatial modelling methodology the space time specific paths to global equilibrium can be observed because it is an atomistic methodology cells represent decision units it is suitable for articulating microeconomic theories of urban processes including planning we present a space time specific simulation of cities evolving under two alternative planning regimes in one the community has property rights and uses planning conditions planning gain impact fees and so on to ensure that each development occurs at a socially optimal density this is a theoretically simplified rendition of the british development control system simplified in the sense of acting from a position of perfect knowledge and having a single objective of optimising locational externalities in the other simulation developers have the right to develop but the community is allowed to make rather than receive compensatory payments in order to achieve socially optimal land use patterns and densities decision making in both systems is local and socially efficient however case by case ad hoc development control with compensatory exactions has the effect of steering development to the least polluting locations although socially optimal densities can occur under alternative control regimes as the second simulation demonstrates the stylised british development control process acts like a decentralised locational pricing system and by definition yields a superior land use pattern than any other style of planning system at one level our model articulates the coasian invariance theorem the same partial equilibrium outcome can be achieved whichever way the property rights over land development fall at another level the results demonstrate that in a spatial resource allocation problem such as land use planning global equilibrium is not independent of property rights the total social product in the urban land economy is greater when the community holds rights over development

planning and housing supply in two speed britain modelling local market outcomes summary economic research on uk housing markets has only recently got to grips with measuring and modelling the impact of planning and other public interventions although their importance has long been recognised in theory the interurban panel dataset utilised in this study does represent a step forward by permitting more robust econometric estimation and by incorporating a wider more balanced range of determinant factors a coherent set of relationships governing the key market outcomes house prices new building migration and vacancies can be established the modelling framework is used to explore differences in behavioural responses between markets in high and low demand states simulations are used to track the impact on market outcomes of different policy strategies applied in different types of locality supply measures needed to achieve national targets for house price growth reduction are assessed measures acting on both demand side and supply side variables in areas of high and low demand are compared these suggest that output is more sensitive than price to policies and that quite strong concerted policies would be needed to impact significantly on the major market imbalances currently seen

internalization advantage and subsidiary performance the role of business group affiliation and host country characteristics we extend internalization theory by examining the contingencies associated with market internalization and its impact on foreign subsidiary survival based on a sample of 6170 subsidiary year observations in 63 countries belonging to 292 mncs from korea during 1995 2013 we find that greater product and labor market internalization have weaker impacts on the survival of subsidiaries operating in countries with more developed institutional environments but stronger for subsidiaries of mncs affiliated with business groups the impact of business group affiliation is further dependent on host country institutional development and the diversification and size of the business group

from bioprospecting to reflexive governance in this paper i evaluate the contribution of new institutional economics to reflexive governance in the field of bioprospecting my hypothesis is that the design of governance arrangements that are both efficient and legitimate necessitates taking into account the reflexivity of the actors on the proposed institutional design in considering this hypothesis i apply current theoretical insights from new institutional economics as developed by oliver williamson and douglas north to the issue of complex contractual relationships in the field of bioprospecting building on these insights i propose some means for ameliorating the current proposals for institutional framing of the contractual relationships d 2005 elsevier b v all rights reserved

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

does hierarchical governance facilitate adaptation to changed circumstances abstract the transaction cost theory of economic organization maintains that by merging and adopting a hierarchical governance structure two firms can circumvent the bargaining problem which would impede adaptation to changing circumstances if they remained independent i analyze this claim in a simple model which allows the costs of hierarchical organization imperfect selective intervention to be evaluated alongside the costs due to the bargaining problem delays and disagreement both costs are due to informational asymmetries which are assumed to be unaffected by the choice of governance structure examples are presented which support the fundamental transaction cost proposition that hierarchical governance is preferred when parties are highly interspecific and there are significant gaps in the contract the intuition is that rational bargainers make less attractive offers in precisely those circumstances where adaptation is likely to be extremely valuable integration effectively separates the decision to adapt from the division of the resulting surplus and so is relatively efficient when substantial quasi rents are at stake

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

asset choice and supplier performance in two organizations us and japanese the problem of vertical integration is a venerable but increasingly important focus of attention in profit seeking organizations over the past ten years many industries have seen increased cooperation between buyers and suppliers to achieve more difficult goals caused by rising product market competition in many firms this cooperation is balanced against the putative advantages of diminishing but still substantial in house operations one way to compare the performance of cooperative suppliers with in house operations is to focus on the buyer s choice of assets used to produce the inputs needed for the final product for strategic reasons some of these assets will be highly specialized and others standardized the question this paper asks is whether this choice of specialized or standard assets influences the performance of the supplier controlling for whether it is in the market or in house the hypothesis is that the choice of specialized assets for strategic reasons is associated with lower supplier conformance with the buyer s target price for the input in other words for these assets the supplier s price which is higher than the buyer would have liked to pay reflects some of the strategic value of the input to the buyer the supplier is simply appropriating some of this value since it can raise its price with a low threat of termination by the buyer for standard assets in contrast the threat of termination is omnipresent so that the choice of assets is irrelevant for supplier price performance the test is performed using data on both in house operations and market suppliers from a quite large us manufacturing firm and on market suppliers to a very successful japanese manufacturing firm interestingly there is no difference between these firms in the applicability of the hypothesis also in house and market suppliers differ in price performance only for standard assets market suppliers performing better organizations can therefore gain quite a bit from outsourcing the production of less specialized inputs but achieve roughly the same performance from in house and market suppliers for more specialized inputs this last result is controversial and should bc tested repeatedly using other micro level data this study therefore addresses three sides of the current debate surrounding modern questions of vertical integration first does the strategic value of the input make a difference in supplier performance the answer is yes but only for specialized inputs second do in house and market suppliers differ in their performance the answer is yes but only for standardized inputs third do us and japanese firms differ in the performance of their suppliers given variation in asset specialization and strategic importance the answer is no at least for the two firms studied here all caveats regarding the generalizability of results from small sample studies apply

on financial innovations and credit market evolution abstract this paper examines the role of financial innovations in the economic development process it discusses the place of policy intervention in the financial development of developing countries and through a case study of an innovative bank illustrates the nature and characteristics of the financial innovations necessary for financing small enterprises and mobilizing resources from low and middle income groups such financial innovations are shown to reduce transaction costs and risk and as a result to bring about widening deeping and intergration of capital markets this process accelerates economic development through a favorable impact on savings investment and output

aligning branding strategies and governance of vertical transactions in agri food chains this article looks at the interactions between branding strategies and governance of vertical transactions branding strategy refers to the choice of information provided to consumers through a brand name governance refers to contractual agreements organizing transactions in vertical chains we build on the logic of transaction costs economics to analyze these interactions we provide an empirical analysis based on case studies to illustrate how governance structures are aligned with branding strategies we show that the governance will depend on the salience of transactions critical or quality relevant transactions are more tightly controlled than the others we also explore the consequences of our results for the alignment principle described in oliver williamson s work

four formal izable theories of the firm in this essay i define and compare elemental versions of four theories of the firm these elemental theories are distilled from important contributions by hart holmstrom klein williamson and others although these contributions have been widely cited and much discussed i have found it difficult to understand the commonalities distinctions and potential combinations of these seemingly familiar contributions in this essay therefore i attempt to clarify these issues in three steps i begin with informal summaries of the theories then turn to simple but formal statements of each elemental theory and finally nest the four elemental theories in an integrative framework

economizing in a context of strategizing governance mode choice in cournot competition abstract this paper builds on riordan and williamson s 1985 paper by exploring the economizing choice of organizational form by firms competing in a homogeneous good market the paper investigates rivalrous firms investment and organization choice in a cournot competition the model suggests that both governance cost and strategic interactions can influence which asset organization pair each firm chooses application of the model is illustrated with a discussion of the cola wars and the organization of the fountain channel

technological change and the boundaries of the firm the authors examine a firm s decision either to produce an essential input itself or to hire a subcontractor to produce the input the authors focus on how this decision is affected by technological change in the industry in general cost reducing technological change leads the firm to produce the input itself more often the firm s calculus is shown to depend on whether the subcontractor s skills are idiosyncratic or transferable in the latter case technological progress can even be detrimental to the firm and to society as a whole copyright 1991 by american economic association

the evolutionary view of the mne and the future of internalization theory kogut and zander s 1993 jibs article which developed an evolutionary perspective on the multinational enterprise mne has had three critical impacts on mne research first it has stimulated scholars to conduct more eclectic empirical analyses which should include both transaction cost related parameters and broader learning competence related variables second it has usefully argued that the rigorous study of mne behavior does not need to reply upon the williamsonian behavioral assumption of opportunism third it has implicitly suggested a new path to be followed by internalization theory scholars in order to remain relevant to the field of international business the transaction cost economics lens adopted in internalization theory clearly remains critical to any analysis of mne strategy with impacts on the boundaries of the firm in addition the co evolution of the mne s governance structure and its technological competences determines present and future strategy choices here both transaction cost considerations and learning effects influence strategy selection

british planning policy and access to housing some empirical estimates there is evidence that the implementation of the planning system creates scarcity rents for land in different uses by acting as a constraint on land supply this paper provides for 1984 estimat

the theory of the firm as governance structure from choice to contract the propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists one reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why the prevalence of the science of choice approach to economics has also been an obstacle as developed herein the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract this paper examines economic organization from a science of contract perspective with special emphasis on the theory of the firm

price smoothing under capacity constraints this paper examines monopolistic pricing decisions under production and storage capacity constraints which firms may well encounter in practice but which have generally been ignored in earlier price inventory analyses if these capacity constraints are present they evidently influence firms pricing decisions these constraints should therefore be formally modelled for a more complete theory of price behavior the paper addresses the issue of whether or not inventories will lead to an asymmetry in price behavior amihud and mendelson 2 and reagan 15 have noted that inventory adjustments moderate downward price adjustments in periods of low demand but do not moderate upward price adjustments in periods of high demand when stockouts occur these analyses are in contrast to blinder 4 wherein a possible symmetric role of inventories and unfilled orders in dampening price adjustments is considered blinder argues that stockouts may not be empirically significant abel 1 observes however that casual empiricism may lead one to think that stockouts are rather

the impact of planning on local business rents despite the pervasiveness of planning intervention in the land and property market the economic effects of the planning system have been little researched while there is a growing body of work addressing this issue in the housing sector similar work considering the business sector is marked only by its absence the paper describes the first substantive attempt to explore this subject area through an analysis of the impact of planning on business rents a full structural model of a local property market was developed it incorporates the planning regime as a key element of the system and it allows for the interaction between property market use sectors the model formed the basis for the creation of a simplified five equation system that could be operationalised within extant data constraints upon application a local effect of planning was identified that was consistent with theory as planning regimes become tighter the local supply of space decreases this has a negative effect on local economic ac

institutional constraints and organizational changes the case of the british rail reform this paper analyzes how institutional constraints determine organizational choices and investments decisions more precisely we examine how private parties adjust when policymakers impose a mode of organization with no or very little consideration for some major characteristics of the transactions that arrangement is intended to support our analysis uses original data related to the reform of the british rail industry notwithstanding their specific aspects the problems raised by the radical transformation of this sector in the mid 1990s carry important lessons about what happens when a misaligned arrangement is implemented in a context that requires interfirm coordination

division of labor organizational coordination and market mechanisms in collective problem solving abstract this paper builds upon a view of economic organizations as problem solving arrangements and presents a simple model of adaptive problem solving driven by trial and error learning and collective selection institutional structures and in particular their degree of decentralization determine which solutions are tried out and undergo selection it is shown that if the design problem at hand is complex in terms of interdependencies between the elements of the system then a decentralized institutional structure is unlikely ever to generate optimal solutions and therefore no selection process can ever select them we also show that nearly decomposable structures have in general a selective advantage in terms of speed in reaching good locally optimal solutions

interactions between members of a marketing production channel under seasonal demand abstract key decisions in a marketing production channel faced with a seasonal demand include production and pricing decisions for the manufacturer and processing and pricing decisions for the retailer in such situations a variety of contracts are possible including contracts under which the manufacturer charges a constant price throughout the season or the retailer processes at a constant rate throughout the season also possible are channel structures in which the manufacturer and retailer cooperate to make decisions jointly the main objective of the present paper is to compare optimal policies under all the situations described above we show that having a constant manufacturer s price or a constant processing rate does not have a significant impact upon the retailer s price or inventory decisions however if the demand is not highly seasonal a constant processing rate contract will result in higher production and processing rates and a lower manufacturer s price compared to a constant manufacturer s price contract also a centralized channel involving joint decision making will lead to a lower price at the retail level and higher production and processing rates hence issues such as channel coordination and contracts between manufacturers and retailers which have received significant attention in the marketing literature have implications for the production area as well

the economics of governance the economics of governance is an effort to implement the study of good order and workable arrangements where good order includes both spontaneous order in the market which is a venerated tradition in economics adam smith 1776 friedrich hayek 1945 kenneth a arrow and gerard debreu 1954 and intentional order of a conscious deliberate purposeful kind chester irving barnard 1938 p 9 also i interpret workable arrangements to mean feasible modes of organization all of which are flawed in comparison with a hypothetical ideal avinash dixit 1996 pp 4 9 the object is to work out the efficiency logic for managing transactions by alternative modes of governance principally spot markets various long term contracts hybrids and hierarchies interest among social scientists economists included in the study and practice of good order and workable arrangements has been steadily growing in contrast with the orthodox lens of choice prices and output supply and demand the economics of governance is a lens of contract construction broadly in the spirit of james buchanan s 2001 p 29 observation that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics the economics of governance as herein described is principally an exercise in bilateral private ordering by which i mean that the immediate parties to an exchange are actively involved in the provision of good order and workable arrangements to be sure the need for private ordering varies with the rules of the game as provided by the state distinctions between lawlessness where the state provides limited or unreliable protection for property and contract dixit 2004 and lawfulness where the state undertakes to protect property and enforce contracts in a principled way are pertinent the first of these applies mainly to primitive and transition economies the second is commonly associated with western democracies recourse to private ordering under conditions of lawlessness is altogether understandable given the absence of state support the walter a haas school of business university of california berkeley ca 94720 1900 the paper has benefited from workshop presentations at the university of california berkeley the university of valencia insead fountainebleau and the 2004 annual conference of the international society for new institutional economics an abbreviated version was also given as the horst claus recktenwald lecture at nuremburg on 4 november 2004 comments and suggestions from fred balderston ernesto dalbo avinash dixit robert gibbons witold henisz ian larkin steven tadelis and dean williamson are especially acknowledged 1 lon fuller s 1954 p 477 definition of eunomics as the science theory or study of good order and workable arrangements is very much in the spirit of what i refer to as governance 2 one of the immediate ramifications of insistently comparing feasible alternatives all of which are flawed is that the purported inefficiencies that are ascribed to failures to achieve first best optimality are not dispositive but invite the query as compared with what i return to this issue in section iv 3 excluding corporate governance the numbers of articles that used the word governance during the period 1998 2000 as compared with the period 1977 1979 in selected economics business management sociology organization and political science journals were 60 vs 1 76 vs 4 79 vs 18 and 60 vs 25 where the journals surveyed were the american economic review journal of political economy quarterly journal of economics rand journal of economics and journal of economic perspectives in economics strategic management journal management science academy of management journal and academy of management review in business management administrative science quarterly organization science american journal of sociology american sociological review and annual review of sociology in sociology organization and american political science review political science quarterly journal of politics and political research quarterly in political science combining these four categories articles using the word governance increased from 48 to 275 over this 20 year interval dixit 2004 pp 149 50 reports that the number of web pages that turn up under the search for governance is huge

economies of scale for various types of manufacturing production technologies in an underdeveloped economy manufacturing sector 2 all these studies suffer from at least three weaknesses first almost all of them have used either the cobbdouglas or the constant elasticity of substitution ces production functions which are highly restrictive second many have used time series analysis without proper attention to time lags and the problems of multicollinearity also they have neglected to separate fully the effects of technological changes on cost from those of the economies of scale third they have invariably assumed labor and capital to be the main factors of production raw materials inputs which are a considerable element of the total cost of production and could therefore cause significant changes in the estimated elasticities of substitution and consequently in the estimates of returns to scale have been ignored altogether 3 the purpose of this paper is to overcome all these weaknesses by using a flexible functional form and simultaneously to estimate returns to scale and elasticities of substitution specifically we use the transcendental logarithmic cost function introduced by christensen jorgenson and lau4 to estimate the measured characteristics of technology for india s manufacturing industries for purposes of comparison we also focus on various specifications of the production technology we describe all functions in terms of a translog specification and distinguish other technologies with appropriate parametric restrictions

a stochastic production planning model with a dynamic chance constraint abstract this paper deals with the optimal production planning for a single product over a finite horizon the holding and production costs are assumed quadratic as in holt modigliani muth and simon hmms 7 model the cumulative demand is compound poisson and a chance constraint is included to guarantee that the inventory level is positive with a probability of at least at each time point the resulting stochastic optimization problem is transformed into a deterministic optimal control problem with control variable and of the optimal solution is presented the form of state variable inequality constraints a discussion the optimal control production rate is obtained as follows if there exists a time t 1 such that t 1 o t where t is the end of the planning period then i produce nothing until t 1 and ii produce at a rate equal to the expected demand plus a correction factor between t 1 and t if t 1 is found to be greater than t then the optimal decision is to produce nothing and always meet the demand from the inventory