Showing papers on "Opportunism published in 1996"

A Resource-Based Theory of the Firm: Knowledge Versus Opportunism

Abstract: 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...

What Firms Do? Coordination, Identity, and Learning

Abstract: Firms are organizations that represent social knowledge of coordination and learning. But why should their boundaries demarcate quantitative shifts in the knowledge and capability of their members? Should not knowledge reside also in a network of interacting firms? This line of questioning presents the challenge to state an alternative view to the “theory of the firm,” a theory that has moved from Coase's early treatment of what firms do to a concern with ownership, incentives, and self-interest. We return to Coase's original insight in understanding the cost and benefits of a firm but based on a view that individuals are characterized by an “unsocial sociality.” Does the perception of opportunism generate the need to integrate market transactions into the firm, or do boundaries of the firm lead to the attribution of opportunism? This basic dichotomy between self-interest and the longing to belong is the behavioral underpinning to the superiority of firms over markets in resolving a fundamental dilemma: p...

Integrating Variable Risk Preferences, Trust, and Transaction Cost Economics

Abstract: Transaction cost economics (TCE) relies on three behavioral assumptions in predicting how firms choose governance structures—bounded rationality, opportunism, and risk neutrality. We explore the implications of the neglected behavioral assumption of risk neutrality. offer an integrative appraisal of the three behavioral assumptions using trust as a unifying perspective, and explicate subjective costs and risks. We illustrate the relative ease with which previous empirical shortcomings can be addressed by incorporating risk and trust in TCE models.

Controlling Supplier Opportunism in Industrial Relationships

Abstract: The recent marketing literature reflects a growing interest in relationship management issues. In particular, several recent studies have drawn on transaction cost and agency theory to examine how ...

Trust, Opportunism and Governance: A Process and Control Model

Abstract: In this paper a process and control model is developed for the analysis and design of inter-firm relations, in which both opportunism and trust play a role. Its aim is to develop a tool for the analysis, diagnosis and design of inter-firm partnerships. It takes into account the value of the partner, relative to alternat ives, and the risk of the relation. Risk depends on the incentives that the partner may have towards opportunism, his opportunities for opportunism and his 'pro pensity' towards opportunism. The latter is related to trust. A partner's incent ives towards opportunism depend on the uniqueness of the value that he offers, on one's own switching costs and on the partner's dependence on the relation. The underlying theory employs both transaction cost economics and social exchange theory. On the basis of the model, values and risks can be balanced in different ways: there are adversarial strategies that jeopardize value, and cooperative strategies that build value. The model can be used to expl...

Knowledge-Based Approaches to the Theory of the Firm: Some Critical Comments

Abstract: It is argued that Kogut and Zander (Kogut, B., U. Zander. 1992. Knowledge of the firm, combinative capabilities, and the replication of technology. Organ. Sci. 3 383–397.) and Conner (Conner, K. R. 1991. A historical comparison of resource-based theory and five schools of thought within industrial organization economics: Do we have a new theory of the firm? J. Management 17 121–154.) erred in the specific way in which they claimed that a distinct theory of the multi-person firm can be constructed on the basis of a theory of organizational knowledge or from resource-based insights. It is not possible to tell very much of a story about why there should be firms in lieu of notions such as “opportunism” or “moral hazard.” However, properly interpreted, knowledge-based theories may help shed light on issues relating to the boundaries and internal organization of the firm.

Why hold‐ups occur: the self‐enforcing range of contractual relationships

Abstract: One of my most enjoyable intellectual experiences was working with Armen Alchian on the Klein, Crawford and Alchian [1978] hold-up paper. In this paper I extend the basic framework presented in that paper, pointing out what I now consider to be its shortcomings and providing insights into the nature of hold-ups and the form of contracts chosen by transactors to avoid hold-ups. The major analytical extension entails combining hold-up analysis with my work on private enforcement. Because private enforcement capital is limited and written contract terms are necessarily imperfect, transactors must optimally combine court-enforced written terms together with privately enforced unwritten terms to define what I call the self-enforcing range of their contractual relationship. Hold-ups occur when unanticipated events place the contractual relationship outside the self-enforcing range. This probabilistic framework, where transactors enter contractual relationships knowing that a hold-up may take place (but believing that the expected gains from trade outweigh the expected rent-dissipating costs associated with the hold-up risk), is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace. I. WHY DO HOLD-UPS OCCUR? I begin with a simple example that illustrates the basic economic forces involved in a hold-up. Assume that a builder constructs a house on a piece of land the builder does not own but, rather, only leases short-term. After the initial land lease expires, the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot. This example illustrates all the hold-up factors emphasized in Klein, Crawford and Alchian - (a) the builder has made an investment that is highly specific to a particular piece of land and (b) the landowner has taken advantage of the incompleteness of the contract that governs the relationship (in particular, the fact that the lease does not cover future years) to (c) expropriate the quasi-rents on the builder's specific investment. The obvious question is why anything like this would ever occur; that is, why would someone be so naive as to build a house on land for which they had only a short-term lease? Our primary goal in Klein, Crawford and Alchian was not to explain the existence of hold-ups, but rather the institutions adopted by transactors to avoid hold-ups. For example, we would expect that builders, anticipating a potential hold-up problem, would decide to purchase the land or at least to sign a long-term ground lease before starting construction. However, we do present some examples in the paper of hold-ups that actually occurred. The implicit reason we give for the occurrence of these hold-ups is transactor ignorance. Apparently, transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold-up problem. Oliver Williamson provides a similar, but much more explicit answer to the question of why hold-ups occur. When defining "opportunism" he states: By opportunism I mean self-interest seeking with guile. This includes but is scarcely limited to more blatant forms, such as lying, stealing and cheating. Opportunism more often involves subtle forms of deceit. ...More generally, opportunism refers to the incomplete or distorted disclosure of information, especially to calculated efforts to mislead, distort, obfuscate, or otherwise confuse.(1) For example, the hold-up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up-front land rental price and vague promises about the future. Relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold-ups. Simple examples of deception, such as a builder constructing a house on land that is only rented short-term, rarely, if ever, occur. …

Crossroads—The Organization of Economic Activity: Transaction Costs, Firm Capabilities, and the Nature of Governance

Abstract: In a recent 1993 paper in Organization Science, Hennart discussed the underlying logic, based on transaction cost and agency theory, for explaining the choice between firms and markets and the reason why most transactions have both firm-like and market-like properties. Relying on Williamson's comparative institutional approach, which studies economic organization from a transaction cost minimizing point of view under the assumption of opportunism, the argument was made that transaction cost (TC) logic provides a complete theory of the organization of economic activity. In this paper, I argue that, with its purely incentive-based logic governed by assumptions of opportunism, TC economics is fundamentally incapable of being a complete theory of economic organization. The notion of the firm as a bundle of transactions or contracts is an inadequate and shallow basis for a theory of the firm since it basically ignores the essential notion of the firm as a bundle of knowledge, and the underlying processes there...

Economic Organization: The Case For Candor

Abstract: The article reports on transitional cost economics (TCE) and opportunism in business. The author focuses on discussing the economic theory of industrial organization. It is suggested that research related to self-interest and cognitive styles is especially useful when considering aspects of organizational behavior. It is further suggested that TCE and industrial efficiency are connected to one another. The author discusses the strengths and weaknesses present in many professional contracts. Prediction methods are also examined.

Institutions and Commitment

Abstract: The thrust of this paper is that to understand the roles institutions play in society, a deep analysis of opportunism and its implications is necessary. For that purpose, a transactions costs-cum-positive political theory approach is developed, with a focus on the role of institutions and their implications for regulatory commitment. A major issue is restraining political opportunism. Countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision-making. But such restraining is itself a political choice. Countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained. Copyright 1996 by Oxford University Press.

Asymmetric Information, Managerial Opportunism, Financing, and Payout Policies

Abstract: We examine corporate issuance and payout policies in the presence of both adverse selection (in capital markets) and managerial opportunism. Our results establish the importance of the locus of decision control in the firm. When shareholders determine policies, debt financing is always optimal in the presence of either adverse selection or managerial opportunism. However, when both of these problems are simultaneously present, equity issuance can become an optimal signaling mechanism. Shareholders' most preferred signaling mechanism is restricting dividends, followed by equity financing, and finally underpricing securities. When managers determine policies, a reversed hierarchy may be obtained.

Transaction cost economics and beyond

Abstract: Preface. 1. Transaction Cost Economics and Beyond: Why and How? J. Groenewegen. 2. Efficiency, Power, Authority, and Economic Organization O.E. Williamson. 3. Empirical Research in Transaction Cost Economics: Challenges, Progress, Directions S.E. Masten. 4. Transaction Cost Analysis and Marketing E. Anderson. 5. Regulatory Issues with Vertically Disintegrated Public Utilities: a Transaction-Cost Analysis K.J. Crocker. 6. Opportunism and Trust in Transaction Cost Economics N.G. Noorderhaven. 7. Short-Term Prevalence, Social Approval and the Governance of Employment Relations S.M. Lindenberg. 8. Inside the Black Box: the Variety of Hierarchical Forms C. Menard. 9. Authority Relations in the Firm: Review and Agenda for Research G.K. Dow. 10. The Core of the Firm: the Issue of the Employer-Employee Relationship M. Turvani. 11. Transaction Cost Analysis - Is It Being Used Out of Context? K.J. Blois. 12. Opportunism, Learning and Organisational Evolution M. Dietrich. 13. Corporate Culture and the Nature of the Firm G.M. Hodgson. 14. Seven Reasons Why `Beyond' Transaction Costs Economics to Thesmoeconomics C. Pitelis. 15. After the Special Nature of the Firm: Beyond the Critics of Orthodox Neoclassical Economics E.L. Khalil. 16. Transaction Costs and Technological Learning P.R. Beije. 17. Towards a Learning Based Model of Transactions B. Nooteboom. 18. Transaction Acosts and Institutional Change L. Magnusson, J. Ottosson.19. A Case for Theoretical Pluralism J. Groenewegen, J.J. Vromen. List of Contributors. List of Tables and Figures. Index.

Coordination, Organizational Boundaries and Fads in Business Practices

Abstract: Management literature focuses on two modes of coordination: formal and informal structures. Informal structure grants significant discretion to individual actions. Yet two impediments are related to such flexibility, those created by opportunism and those created by convergent expectations. Impediments arising from convergent expectations exist when the expectations of all members of an interdependent system are not properly aligned. We use non-cooperative game theory to provide a foundation for the study of convergent expectations. We argue that the incentive to free-ride on the contributions of others is not a necessary condition for generating a lack of convergent expectations, and apply the issue of convergent expectations to both the organizational issues of optimal group and firm boundaries and to the role of managerial practices such as Total Quality Management (TQM). Building on research from organization theory, social psychology and game theory, the paper ties the idea of convergent expectations to the grouping dilemma of the trade-off between higher coordination within groups and lower coordination between groups. We argue that this grouping dilemma can serve as a basis for determining the actual boundaries of both groups in organizations and the organization itself. Examining the role of fads in business practices, we conclude that, however suspect their underlying value as decision aids may be, these practices can serve as useful coordination mechanisms.

The low-trust route to economic development: inter-firm relations in the uk engineering construction industry in the 1980s and 1990s*

Abstract: There is a growing body of literature that suggests that advanced economies are experiencing an economic restructuring such that the engines of economic development are smaller, more independent, firms acting in an increasingly cooperative manner. In assessing whether the UK economy is actually experiencing such a shift in inter-firm relations, the paper firstly assesses the existing evidence. This evidence suggests the continued dominance of large firms and only limited and uneven movements away from a low-trust system. Secondly, the paper presents evidence on the nature of inter-firm relations in the UK engineering construction industry in the 1980s and 1990s. the research shows considerable improvement in performance against schedule associated with the emergence of management contractors. Management contractors can improve performance either by adopting a high-trust route in which they seek to make overall efficiency gains by integrating design and construction, or by adopting a low-trust route in which they seek to reduce scope for opportunism by rigidifying design, and by passing on risk. Evidence is presented which shows that management contractors in the UK have so far predominantly adopted the low-trust route to improved performance. Cumulatively, the evidence suggests the dominance of the ‘top down’ control of inter-firm relations in the UK.

Opportunism and trust in transaction cost economics

Abstract: Transaction cost economics (TCE) as developed by Williamson (1975, 1979, 1985, 1991) focuses on the relationship between attributes of transactions and characteristics of the governance structures used to accommodate these transactions. Transactions vary in many dimensions, the most important of which is the degree of asset specificity. A party incurring relation-specific investments will demand safeguards to prevent its counterpart from attempting to appropriate the quasi-rents associated with these assets (Klein et al., 1978).l These safeguards can take the form of formal, legally enforceable contracts, or of extra-legal private ordering arrangements.

The participatory principle in development projects: the costs and benefits of cooperation

Abstract: Many development theorists and practitioners, including those in key agencies like the World Bank and UNDP, now see participation as critical to successful project implementation, and strongly support cooperative organizational systems. This article cautions against undue optimism about such forms of organization, and attempts to explain their limited success when they compete with private firms by applying rational choice theory to behaviour in cooperative systems. It examines the relevance of assumptions of self interest, opportunism and bounded rationality in such solidaristic organizations, then uses them to calculate the costs and benefits of using participatory systems. It shows that these costs are likely to outweigh the benefits in large organizations unless participatory processes are effectively associated with managerial autonomy, appropriate incentives, sanctions and hierarchies. © 1996 by John Wiley & Sons, Ltd.

A Framework for Appraising Educational Reforms

Abstract: Transaction-cost economics provides a framework for appraising educational reforms, i.e., deciding whether these reforms are likely to succeed in the “real life” of schools. This framework conceives of reform as a contract between reformers and stake-holders (teachers, students, parents), and these transactions are marked by bounded rationality, opportunism, and the protection of specific assets (e.g., accumulated knowledge and skills) on the part of participants. Not acknowledging these attributes turns reforms into unproductive planning exercises—mere promises without results—or stakeholders struggling to protect their assets, resulting in the failure of the reform. Several current educational reforms are judged on the basis of their transaction costs and consequent prospects for success.

The Keiretsu puzzle

Abstract: Why do large firms in Japan hold small percentags of stock in trading partners? A firm that holds stock in a trading partner weakens its own bargaining position, for a portion of its own gain from trade then includes a share interest in the partner's gain from trade, but precisely for this reason the firm can at any time penalize the trading partner by divesting its share interest. Cross-shareholding therefore strengthens the penalities for opportunism and this may be its purpose. Opportunism here means substituting products of quality lower than claimed or promising and then failing to make investments that would lower the other party's costs. Econometric analysis of the pattern of cross-shareholding within Japan's keiretsu groups in 1980 reveals evidence that is consistent with this argument. J. Japan. Int. Econ., June 1996, 10 (2), pp. 101–121. Department of Economics, North Carolina State University, Raleigh, North Carolina 27695-7506.

Why and When Do Governments Initiate Public Enterprise Reform

Abstract: Initiating public enterprise reform is a complex decision influenced by economic factors as well as the ideological biases and personalities of political leaders. Nevertheless, the use of a contracting framework yields important generalizations about what drives the decision. This article argues that the decision depends fundamentally on the potential efficiency gains from the reform and its associated transactions costs. Costs arise because of asymmetries in information and opportunism, problems that usually plague contract negotiations. The article identifies observable variables that may affect either the potential gains or the transactions costs, uses them to construct a simple probit decision-making model, and tests the model using data from fifteen developing countries over a twenty-year period.

The contractual nature of budgeting: A transaction cost perspective on the design of budgeting institutions

Abstract: Viewing budgets as contracts, transaction cost theory focuses on the costs of negotiating and enforcing the myriad political agreements by which policymakers allocate the government's resources. This essay provides an overview of transaction cost theory and its implications for the design of budgeting institutions. It contrasts the behavioral premises (bounded rationality and opportunism) of the transaction cost approach with those of more traditional budgetary theories, and examines whether commitment and agency costs have structured budget actors' institutional choices. Investigation of the usage of key budget instruments- entitlements, multi-year appropriations, and tax expenditures - suggests that Congress has been more discriminating in its institutional choices than is commonly supposed. Sensitivity to the importance of transaction costs would increase the effectiveness of budget reforms.

Transaction Cost Economics and Beyond: Why and How?

Abstract: Transaction cost economics (TCE) has positioned itself in the center of the economics of organization. From Williamson (1975) onwards TCE has made important progress both in conceptualization and in empirical testing (see Groenewegen and Vromen in this volume). The position of TCE at this moment is outlined in the contribution of Williamson in this volume. The key concepts are of a technical (asset specificity), of a human (bounded rationality) and a behavioral nature (opportunism). The general strategy out of which TCE works can be summarized as follows: After having characterized the transaction, the potential governance structures are discussed in terms of transaction cost minimizing capabilities. The match of transactions with governance structures is formulated in reduced form hypotheses to be confirmed in empirical research.

The Macroeconomics of Specificity

Abstract: Specific quasi-rents build up in a wide variety of economic relationships, and are exposed to opportunism unless fully protected by contract. The recognition that such contracts are often incomplete has yielded major insights into the organization of microeconomic exchange. Rent appropriation, we argue, also has important macroeconomic implications.

The Determinants and Economic Outcomes of Trust in Supplier-Buyer Relations

Abstract: In this paper we examine the antecedents and outcomes of supplier trust in 453 supplier-automaker relationships in the U.S., Jap~ and Korea. Our findings indicate that high supplier trust emerges when (1) automakers have developed assistance-giving routines to help suppliers improve, and (2) automakers maintaina continuing (repeated) exchange relationship with the supplier. We also found that trust reduces transaction costs and increases information sharing in supplier-buyerrelationships. Moreover, the findings suggest that the economic value created for tmnsactors may be substantial as evidenced by the fact that the automaker with the least trusting supplier relations had five times the procurement costs and spent tice as much of its fiice-to-faceinteraction time with suppliers on ex ante contracting and ex post haggling when compared to the most trusted automakers. Thus, our findings suggest that trust in supplier-buyer relations can create economic value and may be an important source of competitive advantage. The issue of trust in economic exchanges has recently received considerable atiention in the academic literature (Sake, 1991; Williamson, 1993; Barney & Hansen, 1994; Mayer, et al 1995) as well as the popular press (Business Week, 1986, 1992; Economist, 1995; Fukuyam~ 1995). Some have described trust in exchange relationships as an important antecedent to effective irzterorgani=tional collaboration (Jarillo, 1990; Sake, 1991; Smith, Carroll, and AsMor~ 1995), and have proposed that it is a valuable economic asset. Furthermore, some have proposed thattrustin supplier-buyer relations: (1) lowers transaction costs and allows for greater flexibility in responding to changing market conditions (Dore, 1983; Sa.ko, 1991; Barney& HanseIL 1994; Dyer, 1996b), (2) leads to superior information sharing routines, which improve both coordination and mutual tom inimize inefficiencies (Aoki, 1988; Clark& Fujimoto, 1991; Nishiguchi, 1994), and (3) facilitates investments in transaction or relation-specljic assetsi and technologies which enhance productivity (Asan~ 1989; Lore= 1988; Dyer, 1996a). Some scholars even claim that mtional economic efficiency is highly correlated with the existence of a high trust institutional environment (Nortk 1990; Casson, 1991; Hill, 1995; Fukuyamz 1995). For example, Fukuyama (1995:7) argues that the economic success of a natiom “as well as its ability to compete, is conditioned by . . . the level of trust inherent in the socie~.” Ind@ numerous scholars have suggested that interorganizational trust is a key factor in explaining the competitive advantage of Japanese firms relative to U.S. or U.IC ilrrns (Dore, 1983; Smi@ 1991; Sake, 1991; Dyer, 1996b). The findings from these, and other, studies have increased our attention on the important role of trust in economic exchanges. ‘ We use the terms transaction and relation-specific investments interchangeably,though we prefer the term “relation-specific” to suggest a shifl in attention horn the transaction to the economic relationship as the unit of analysis (see KoguL 198$%Powell, 1990). [n response to these studies, some have exhorted companies to build trust with their trading partners (Business Week, 1986, 1992) and called for increased research on the role of trust in coordinating economic activity (Smith, CarrO1l,and Ashford, 1995). However, despite considerable academic and managerial interest in trust between trading partners, to date there has been little empirical research on the antecedents or economic outcomes of interorganizational trust (i.e. bemeen suppliers and buyers). In fact, with the exception of some anecdotal, case study evidence (Dore, 1983; Lorew 1988; Sake, 1991; Fukuyam% 1995; Dyer, 1996b) there have been few, if any, large-sample empirical studies on the relationship between trust and the various activities believed to create economic value in exchange relationships. As Zucker (1986:59) has obsewe~ “For a concept that is acknowledged as central, trust has received very littie empirical investigation-” In this paper we examine the dete rxninants of trust as well as the relationship between trust and performance outcomes, in a sample of supplier-buyer exchange relationships. More specifically, we seek to answer the following questions: (I) W%atvariables influence the doe!opment of & trust in supplier-buyer reiationrhips? (2) Do_ that have developed a high level of trust in a buyer (a) incur lower transaction costs, @ share more informatiofl and(c) make greater investments in relation-specific assets than suppliers with iower levels of tit? We investigate the antecedents and outcomes of trust in a sample of 453 supplier-automaker exchange relationships in the U.S., JapaL and Korea We also examine the extent to which trust creates “measuralie” economic value for automakers by examining whether or not “worthy” automakers incur lower procurement (transaction) costs than “untrustworthy” automakers. In summary, our objective is to empirically examine in a cross-national setting: (1) the determhmts of supplier trusk and (2) whether or not trust creates economic value in supplier-buyerrelatiomtips. THEORETICAL FRAMEWORK AND HYPOTHESES Defining Trust Williamson (1993 :453) has noted that “trust is a term with many meanings.” Indeed, various scholars have offered different definitions of types of trust, including goodwill or relational trust (Sake, 1991; Sahel, 1993; Hesterley et al, 1995), process-based trust (Zucker, 1986; Zaheer & VenkatramU 1995), institutional trust (AITOW, 1974; Zucker, 1986), competence trust (Sake, 1991), and calculative or contractual trust (Sake, 1991; Williamson, 1993). Among organizational scholars, trust has received attention as a mechanism of organizational control, especially as an alternative to price, contracts, and authority (Ouchi, 1980; Bradach & Eccles, 1989; Powell, 1990). In this study we consider trust between a supplier and its customer. We define trust as one party’s confidence that the other party in the exchange relationship will not exploit its vuinerabilities (Dore, 1983; Sake, 1991; Sahel, 1993; Barney & HansexL 1994). This confidence (trust) is expected to emerge in situations where the “trustworthy” pin the exchange relationship: (1) makes good ftith efforts to behave in accordance with prior commitments, (2) treats the exchange partner in ways perceived as “fair” by that partner, and (3) does not take advantage of an exchange partner even when the opportunity is available. In many respects, opportunism may be viewed as the opposite of trust. A firm is opportunisdcto the extent that it does not live up to prior commitments and takes advantage of an exchange partner’s vulnerabilities. Our definition of trust is similar to the “goodwill trust” description given by Sako (1991) and the “trust” definitions offered by numerous schohrs (Sahel, 1993; Ring V Barney& HanseQ 1994). As defied here, trust is self’tiorcing and is not based upon contractdegal sanctions.

Will opportunism go away

Abstract: It has been suggested that opportunism will go away because absence of opportunism economizes on transaction costs, and therefore has a better chance of survival in the selection process of markets. But the tension between collective and individual advantage has to be taken into account. If self-interest is the only driving force of conduct, opportunistic conduct goes away only when monitoring for it is perfect and costless, and the penalty for loss of reputation exceeds its reward. Opportunism can go away when institutions immunize agents against the temptations of opportunism. But the problem then is how to protect those institutions against inroads of opportunism from outside. Such entry may arise if one participates in world trade. Then, opportunism still may not go away.

Opportunism, Learning, and Organizational Evolution

Abstract: The main thrust of this chapter is to compare and link two separate literatures that claim to provide a coherent account of organizational evolution On the one hand we have transaction cost theory, arguably dominant within economics, which uses a universal efficiency-seeking logic; on the other hand we have various approaches to the understanding of corporate restructuring that, while being different, all emphasize a shifting strategic logic It will be argued in this chapter that these two bodies of literature provide differing approaches to organizational evolution that can benefit from the insights offered by each

Public Accountability in an Age of Contracting Out

Abstract: The purpose of this article is to examine the existing legal structure of government contracting, and to assess its capacity to ensure governmental accountability in the contracting process. This analysis has two separate stages, corresponding with the two periods in which the government can effectively engage in opportunistic behaviour. First, the control of opportunism in the process of contract formation (or ex ante opportunism) will be examined. Second, the analysis will examine the control of opportunistic behaviour on the part of government in the process of contract performance (or ex post opportunism).