Transaction Cost

This paper examines the performance of China stock market from a new perspective, uses a comprehensive indicator to evaluate all aspects of the market scientifically, and enriches the method of analyzing market micro-features. In practice, it analyzes the implicit transaction cost and influencing factors of the China stock market, provides theoretical support for the government to improve the market system and regulate the behavior of market players, which is condu- cive to the healthy, standardized, efficient development of China stock market. There are some areas for improvement in this article. First of all, this paper cannot describe the changing pattern of implicit transaction cost within one day. Secondly, it ignores other factors such as price volatility, market depth, and company size when studying the influencing factors of China stock market per- formance. Finally, the Gibbs sampling method that is suitable for the Chinese market still needs further verification.

Transaction Cost Economics: A business firm needs to incur costs for searching new buyers and suppliers, negotiating with exchange partners, long-term contracting and monitoring the transaction agreements due to the asymmetrical information generated by imperfect market mechanism (Dyer, 1997; Hobbs, 1996; Williamson, 1985). Those costs are termed as TC (Coff, 2001; Dyer, 1997; Williamson, 1979, 1985; Zhang, 2009).Classical economists assumed that transactions can be made without spending any costs if they have perfect knowledge about the market (Hobbs, 1996; Priyanto et al., 2014). They build this argument assuming that all exchange parties have equal information (Priyanto et al., 2014). In reality, information are unequal among transaction parties. Asymmetrical information blocks business firm to make rational decisions which is called as bounded rationality on the one hand and encourage exchange partners to behave opportunistically (opportunism) against the focal firm on the other hand (Williamson, 1981). These reasons appeared due to the asymmetrical information and therefore transactions tend to become costly (Williamson 1979, 1981). TC differ in the degree to which transaction specific assets (assets specificity) are involved, the amount of uncertainty about the future (environmental uncertainty), the amount of uncertainty about other parties’ actions (behavior uncertainty), and the frequency with which a given transaction occurs (Everaert, Sarens and Rommel, 2010). These characteristics of TC are governed by market or hierarchy. Business firms attempt to govern TC in economize manner employing these two alternative strategies i.e. ‘market’ or ‘hierarchy’ (Zhang, 2009). If a transaction is performed outside the firm through market coordination, the governance structure being utilized is a market where the price mechanism governs the transactions. If a firm governs transaction within its boundaries through bureaucratic control and coordination, the governance structure being utilized is a hierarchy (Williamson, 1991). A selection of TC governance is based on the comparison of TC between ‘market’ and ‘hierarchy’ (Priyanto et al., 2014; Zaheer, 2009).

TCA can be employed as a theoretical foundation for the study of IMS. IMS is a rationally bounded decision that is performed as a firm choice from the available full set of international markets (Papadopoulos and Martín, 2011). When making IMS decision, managers face a multitude of diverse international markets. They have bounded rationality due to their constrained cognitive capabilities and information processing and communication ability. IMS also involves opportunistic export partners seeking to serve their self-interests, which leads to safeguarding problems in the presence of asset specificity (Anderson and Gatignon, 1986; Klein et al., 1990). IMS decision entails a series of export transactions, which marks the significance of transaction cost reduction in manager ’ s decision-making process. Thus TCA is relevant for IMS, and could provide the theoretical base for determining the optimal strategy for IMS.

model based on transaction cost and specialization to investigate the evolution and role of entrepreneurship in a competitive market under globalization. Since the gen- eral equilibrium in our model is always Pareto optimal as long as nobody can block free entry into any sector and nobody can manipulate relative prices and numbers of specialists. It further proves Schumpeter’s description [8,9], that the entrepreneurship service would be driven by the desire to creatively bring about new products, new production processes, new business patterns and new economic institutional systems to increase the per capita real income. It also explains the reason why along the commercialization and modernization of human society, there are substantially increasing amount of professional entrepreneurship service available for business world, and also becoming more affordable for more business companies. With the improvement of transaction effi- ciency, the professional entrepreneurship service is more preferred and profitable, and the professional entrepre- neurship service will bring about new business patterns and new economic institutional systems to improve the well-being to the members of society. If the entrepre- neurship in a competitive market under globalization is efficient, it will ensure that network effects of division of labor can be fully exploited when the gains from the di- vision of labor outweigh the costs of exchange between individuals of different specialization patterns with the different fixed learning costs. Hence, the entrepreneur- ship service in a competitive market under globalization can promote aggregate productivity by enlarging the scope for trading off network effects of the division of labor on aggregate productivity against transaction costs. To business practitioners, this model suggests that the entrepreneurship service is a key element of business viability during which a major transition took place in human activity. The improvement of the level of globa- lization and the general transaction efficiency coefficient will also increase the level of division of labor, as well as the per capita real income level and well beings among participants.

In a next step, axial coding was applied to detect commonalities and differences in LTSM approaches across cases (Ellram, 1996; Pratt, 2009), which also led to the distinction in proactive, active and reactive LTSM approaches (Figure 1, end of section 4). To manifest and complement these relative comparisons, we applied pattern-matching to identify contextual factors that explain each firm’s PSR and choice of LTSM approaches (Yin, 2003). To theorize our findings, we then reflected the case findings in TCE in order to derive more abstract second-order quotes. Accordingly, we structured our findings along the transaction cost drivers and the resulting governance modes (Figure 1). This process was non-linear but required numerous iterations between data coding and theory elaboration. Thus, the analysis revealed the abductive reasoning at a more general level and supported us in developing theoretical perspectives on LTSM (Strauss and Corbin, 1990).

Influenced by Econimics, there are some papers that apply transaction cost into politics to analyze institution, political organization and so no. Moe [6] delivered the paper, The New Economics of Organization, applying organization theory of new institutional economics to study public bureaucracy. In the paper—The Industrial Organization of Congress; or, why Legislatures, Like Firms, Are not Organized as Markets—Weingast and Marshall [7] used the transaction cost theory to explain the legislative system. North [8] formally introduces the concept of transaction costs into political science in his paper, A Transaction Cost Theory of Politics, and he comes to the conclusions that the political market tend to be more inefficient. Dixit [9] formally proposed the concept of transaction cost politics in his works, The Making of Economic Policy: A Transaction-cost Politics Perspective. Vira [10] went even further, he established the Political Coase Theorem. Sandler and Cauley [11] adopted the concept of transaction cost to explain how supranational structure design.

Irrigation tanks formed the lifeline of village economy. The Government of Karnataka amended its Irrigation Act in 1965 and Participatory Irrigation Management (PIM) was brought under the domain of Cooperative Act and Water Users Cooperatives were formed to managed and operate the tanks. The present study was undertaken to assess the transaction cost in irrigation tank management in central dry zone of Karnataka. Two tanks Bukkarayanakere (farmers managed) and Ayyanakere (Minor Irrigation Department managed) were considered for the study. The results revealed that, total transaction cost incurred was high in Minor Irrigation Department managed tank or defunct water users association (` 1,06,085 per year) than farmers managed tank or active water users association (` 61,480 per year). This is because of free riding problem that prevailed in the Minor Irrigation Department managed tank command. Educating the farmers regarding the benefits of collective action is necessary to reduce the transaction cost.

Aggregating and organizing patent information on an online exchange relies on multiple technologies and standardized processes. Advancements in Internet technologies, particularly the advent of web 2.0 utilization architectures and networking capabilities, are a critical facet of effectively matching patent owners with manufacturers in a global market. The Internet facilitates the exchange of ideas among culturally diverse, decentralized and geographically disparate individuals or companies (Brabham 2008). The vast scale of the web and the instantaneous exchange possible between users enables the efficient aggregation of disparate rights (Terranova 2004). Communication technologies permit participative, multidirectional and highly inclusive behavior (Delfanti 2010) as they break down transaction cost barriers separating small and multinational firms. Most importantly, the PatentBook exchange capitalizes on the semantic web: searchable patent rights databases are efficient because web content is increasingly understood by computers that perform a large amount of the tedious tasks that share and combine the information provided by the multiple users (Albors et al. 2008). Strict self-evaluation and submission processes enforced by TGL enable this process. Patent owners can conveniently submit patents at no cost and offset patent maintenance costs with the minimal royalties received from participation in the PatentBook. The patents can also be removed at no cost. Patent owners simply need to honor the terms of the licenses granted prior to the removal of the patent from the PatentBook. The technology for aggregating user- generated content is low-risk and mature. PatentBooks leverage these technologies and deploy them in tandem to reduce patent licensing search and information costs.

In 1975, Williamson developed and expanded Coase’s views to promote better awareness of transaction cost theory among economists. He proposed that failure to complete a transaction usually stems from market fail- ure caused by human and environmental factors, which cause difficulties in market transactions and increase transaction costs. The human factors highlighted by Wil- liamson included the bounded rationality and opportun- ism of human beings, whereas the environmental factors included uncertainty, complexity, and small transaction volumes. In addition to these factors, information asym- metry and the atmosphere were recognized as factors that could increase transaction costs. In 1985, William- son further proposed that the suppositions of asset speci- ficity and the frequency and uncertainty of transactions could cause organizational failures and increased trans- action costs. Therefore, transaction costs were defined as the costs incurred from the transaction process in addi- tion to that agreed by the parties involved. Such costs include those incurred from information searching, negotiating, drafting, maladaption, haggling, setup and running, and bonding [10].

The current work aims to address one of the main weaknesses seen in recently developed optimization methods for finding the mortgage borrower‟s optimal refinancing strategy, namely, the Monte Carlo simulation based approaches contained in [10] and [11], where transaction cost is not considered. Interesting mathematical properties of the free boundary near expiry is discovered. Such property can provide useful hints for asymptotic properties of American put option as discussed in [7]. The risk neutral refinancing premium is introduced to mathematically calibrate the threshold rate at which refinancing is optimal when transaction cost is considered. Numerical results are provided to calibrate the optimal refinancing boundary.

Yet, as the claims made recently relating to the events surrounding the dispute in Maritime Union of Australia v Patrick Stevedores No 1 Pty Ltd (unreported, Federal Court of Australia, North J, 21 April 1998) arguably may show, (Note 17) it is entirely possible that in some circumstances the firm may act opportunistically in relation to the individuals over which it has control: Tham [1998]. (Note 18) In particular, various researchers have noted that accounting is centrally implicated in the control mechanisms of society, and that it is involved in an important way in the conflicts surrounding the exercise of economic and political power [eg Ansari and Bell, 1991; Arrington and Putuxy, 1991; Burchell et al, 1980; Cooper and Sherer, 1984; Dillard, 1991; Hopwood, 1987; Lehman and Tinker, 1987; Miller and O’Leary, 1987; Tinker, 1980, 1985, 1988; and Tinker, Lehman and Neimark, 1991]. In light of recent calls for increased ‘industrial democracy’ in the workplace [Albert and Hahnel, 1991; Gee, Hull and Lankshear, 1996; Hodgson, 1984; Pateman, 1970; and Turner, 1991], perhaps the holistic approach to transaction cost economics and managerial accounting as explored by this paper could be applied also in facilitating a greater degree of legitimate control over the firm by individuals. As Hopwood [1976; 5] observes, ‘[m]uch of the accounting as we know it today reflects the capitalist ethos, but as social and political pressures change, so we can also expect the forms and philosophies of accounting to change.’ Drawing on Alchian and Demsetz [1972; 790] as a starting point, this change broadly could take initially the form of monitoring aspects of employer performance that ‘are less easy to meter and are more subject to employer shirking’, (Note 19) and expand gradually if it becomes more accepted.

and as such does not alleviate the costs associated with adoption for many users who have specific needs. We are already witnessing and likely to continue seeing alternatives to Ethereum as well as special-purpose digital platforms being built to support special-purpose smart contracts (“A Deeper Look” 2018). Such platforms could provide additional services which would ease adoption and provide further transaction cost savings for firms considering moving additional transactions outside their boundaries. First, they could reduce various expenses such as contract drafting (including integrating sensor data) and negotiation costs through the provision of standardized smart contracts templates (Oranburg and Palagashvili 2018; Werbach and Cornell 2017). Furthermore, such platforms could decrease vendor search costs by providing cost-effective means to access information, reducing the burden of the parties to contact a huge number of alternative counterparties individually (Bakos 1998; Popiel 2017). For example, online platforms often screen out obviously inappropriate participants by defining platform participation criteria and building reputation systems (Bakos 1991; Malone et al. 1994). They can also reduce the problem of information asymmetry by helping optimize contractual terms through aggregation of historical data, thereby increasing the counterparty trust and accountability (Savelyev 2017). These benefits, however, arise from the use of particular digital platforms supporting smart contracts and not from the concept alone.

In this paper, we examine the incidence of outsourcing of jobs by US firms from a Transaction Cost Economics perspective. We also examine if there are adjustment difficulties that displaced workers face due to job loss. For this study, we analyzed Mass Layoff Survey (MLS) and Displaced Workers Survey (DWS) data for the period 1996 to 2004 collected by the Bureau of Labor Statistics (BLS). The analysis finds that Finance and Insurance, Information, and Professional and Technical Services sectors experienced an increase in the separation events due to Mass Layoffs. Displaced workers within the age group of 35 to 44 years were the longest out of a job with the time taken to find a job standing at 6.3 weeks. Those in the age group of 25 to 34 years found jobs in 3 weeks. Educated workers with advanced degrees were able to find alternate employment within 1 week, while those with a high school degree were out of a job for 7.1 weeks. Overall, displaced workers experienced a 7.2 percent earnings loss when reemployed. 26.4% of the displaced workers faced an earnings loss of over 20% when reemployed. These consequences have implications for policy makers, managers and workers.

Although, a body of knowledge on the factors that drive the intention to adopt cloud computing services is forming, evidence is scarce and is restricted to a handful of geographic regions. Furthermore, a number of other factors remain relatively unexplored such as vendor trust, the uncertainty around cloud computing legislation, and the security and reliability of the service. Also, there is little knowledge of the types of cloud computing solutions used in terms of applications and services outsourced. This study aims to address this gap using transaction cost theory (TCE) (Williamson, 1985). TCE emphasizes the lack of trust in exchange relationships, as well as the various uncertainties that surround transactions, including technological uncertainty (Sutcliffe & Zaheer, 1998). These concepts may be of relevance in explaining organisations’ intention to adopt cloud computing services. The purpose of this paper is to extend our understanding of the factors that drive cloud computing adoption, as well as to provide some evidence on adoption rates from a new region, which is Australia.

The regulatory regime is a third factor influencing the evolution of natural gas markets. Any type of regulation which distorts the incentives of buyers of sellers will shorten the duration of contracts in the natural gas industry according to transaction cost theory. This is because such regulation raises the costs of monitoring a contract, and these additional costs reduce the benefits of extending a contract. Well-structured regulations, however, are instrumental in avoiding situations where market power can be exerted, such as in the case of pipeline access.

The Safety Regions Act is the statutory basis which describes responsibilities of organizations involved in crisis management in the Netherlands. The Safety Regions Decision is an elaboration of the Safety Regions Act and sets quality requirements for those organizations. Municipalities are responsible for informing the population, the provision of shelter and care, the provision of aftercare, victim registration, and damage registration during or after a disaster or crisis. How to perform these municipal services in crisis management is up to municipalities. The research for this thesis was commissioned and facilitated by the municipality of Oost Gelre. The main research question in this thesis reads 'which governance forms are suitable for the municipality of Oost Gelre to perform municipal services in crisis management, taking into consideration its position within the Security Region Noord- en Oost-Gelderland?' In the theoretical framework three main governance forms are distinguished which determine how products or services are produced or delivered. Market governance essentially means buying products or services from a seller. In hierarchical governance, products or services are produced or performed by an organization itself, in this case a municipality. Finally, network governance basically refers to producing or performing services in cooperation with (multiple) other organizations. According to transaction cost theory, which governance form is the most suitable depends on conditions of asset specificity, uncertainty, and frequency. In addition to these three variables, resources and the concept of public transaction are included.

In terms of funds, individual schemes have more funds to be acquired than the group lending scheme. In the group scheme, each member only received Rp 2.000.000. This finding is consistent with research from Madajewicz (2004) which states that despite lower transaction costs and the funds obtained through group lending schemes fewer than the individual loans. On the individual schemes, they will gets a bigger funds between Rp 5.000.000 to Rp 50.000.000. For example, customers with individual schemes apply for a loan amounting to Rp 5000.000 and using the vehicle reg (BPKB) as collateral. Assume the transaction costs that will borne by the individual clients are equal to the total of transaction cost with ve- hicle reg (BPKB) as collateral, which amounted to Rp 134.083. So, the client of the individual scheme will receive a credit fund about Rp 4.865.917 net. So that, the transaction costs borne by the clients with the individual loan scheme is 2.86% of the total of the credit funds.

Monopoly, in general, seems to be the result of market failure. Market power should be viewed more broadly than vertical integration and monopoly power should be viewed more broadly than market power. Transaction costs lie at the heart of all forms of monopoly, not only vertically merged firms. Transaction costs explain large firms altogether, how they have grown naturally out of small, competitive firms through the market process. But transaction costs as well explain state-owned monopolies, how and why the state undertakes to perform the activities of the market and provide goods and services that the market fails to provide properly. In the extreme case of complete market failure the state undertakes to provide socially important goods and services that no private agent wants to provide through the market because in the presence of significant transaction costs the market does not pay him to provide those. According to Williamson enlarged firms do not seek market power but aim at cost efficiencies. The ultimate effect though is market power. Whether two large firms merge or a small company grows naturally taking over the functions of the market to turn into a single, dominant firm in it, transaction costs appear to be the driving force behind market power. The presence of transaction costs leads to the substitution of the market with nonmarket allocation and collective action in the form of firms with huge market power. Although a form of non-market allocation, large, dominant firms exhibit market power and represent a direct result of market failure. Likewise, the state-owned monopoly comes in to play the same role whenever there is market failure present. Both types of monopoly, private and public, are forms of collective action. Both private and public monopoly share the task of replacing the market in overcoming sizable transaction costs but whereas private monopoly relies on private ownership, the state-owned monopoly indeed relies on the coercive power of the state in cases when private ownership is costly or inefficient and public ownership is a swifter, cheaper and more efficient mode of allocating resources within the economy. At the aggregate level, through the transaction-cost economizing role of public ownership such state-owned monopolies may, in effect, maximize the aggregate output of the economy beyond what private monopolies provide for.

Transaction Cost, Technology Transfer and Mode of Organization Mandal, Biswajit and Marjit, Sugata Visva-Bharati University, Santiniketan, India, Centre for Studies in Social Sciences, C[r]

These prelimenary exploratory findings suggest more work in examining how firms and institutional difference shape transaction cost in emerging markets. This study has indicated the consistency (between developed and emerging markets) with respect to TCA standing literature but this is too soon to conclude that there are no serious differences. Performance ambiguity role in shaping contractual agreement is still dependent on asset specificity. The study pave a way for managers from western firms who are looking for outsourcing possibilities in emerging economies to extend the current TCA assumptions in those markets. This again has to take into account other factors (cultural, institutional and nature of firms). This study is limited partly by being an exploratory, but also it has not included other variables like firm size effects and institutional variables. This should be considered as door for further studies on this area.