Showing papers on "Opportunism published in 2007"

The economic institutions of capitalism : firms, markets, relational contracting

Abstract: This study is based on the belief that economic organization is shaped by transaction cost economizing decisions. It sets out the basic principles of transaction cost economics, applies the basic arguments to economic institutions, and develops public policy implications. Any issue that arises, or can be recast as a matter of contracting, is usefully examined in terms of transaction costs. Transaction cost economics maintains that governance of contractual relations is mainly achieved through institutions of private ordering instead of legal centralism. This approach is based on behavioral assumptions of bounded rationalism and opportunism, which reflect actual human nature. These assumptions underlie the problem of economic organization: to create contract and governance structures that economize on bounded rationality while safeguarding transactions against the hazards of opportunism. The book first summarizes the transaction cost economics approach to the study of economic organization. It develops the underlying behavioral assumptions and the types of transactions; alternative approaches to the world of contracts are presented. Assuming that firms are best regarded as a governance structure, a comparative institutional approach to the governance of contractual relations is set out. The evidence, theory, and policy of vertical integration are discussed, on the basis that the decision to integrate is paradigmatic to transaction cost analysis. The incentives and bureaucratic limits of internal organization are presented, including the dilemma of why a large firm can't do everything a collection of small firms can do. The economics of organization in presented in terms of transaction costs, showing that hierarchy also serves efficiency and permits a variety of predictions about the organization of work. Efficient labor organization is explored; on the assumption that an authority relation prevails between workers and managers, what governance structure supports will be made in response to various types of job attributes are discussed, and implications for union organization are developed. Considering antitrust ramifications of transaction cost economics, the book summarizes transaction cost issues that arise in the context of contracting, merger, and strategic behavior, and challenges earlier antitrust preoccupation with monopoly. (TNM)

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...

Interfirm Monitoring, Social Contracts, and Relationship Outcomes:

Abstract: This article examines the effects of monitoring on interfirm relationships. Whereas some research suggests that monitoring can serve as a control mechanism that reduces exchange partner opportunism, there is also evidence showing that monitoring can actually promote such behavior. The authors propose that the actual effect of monitoring depends on (1) the form of monitoring used (output versus behavior) and (2) the context in which monitoring takes place. With regard to the form of monitoring, the results from a longitudinal field study of buyer–supplier relationships show that output monitoring decreases partner opportunism, as transaction cost and agency theory predict, whereas behavior monitoring, which is a more obtrusive form of control, increases partner opportunism. With regard to the context, the authors find that informal relationship elements in the form of microlevel social contracts serve as buffers that both enhance the effects of output monitoring and permit behavior monitoring to s...

Are joint venture partners more opportunistic in a more volatile environment

Abstract: This study examines how joint venture partners' opportunism is influenced by environmental volatility in a drastically changing emerging economy. Building on transaction cost and information-processing theories, we develop the hypothesis that opportunism increases to cope with industry structural instability, information unverifiability, and law unenforceability, the three interrelated yet distinct characteristics that jointly describe environmental volatility in an emerging economy. Our analysis of 188 foreign joint ventures in an emerging market suggests that opportunism increases with information unverifiability and law unenforceability. These relationships are even stronger when joint ventures depend more on the host country environment, but weaker when joint ventures operate in faster-growing industries. Finally, opportunism is found to play a mediating role in the relationship between environmental volatility and joint venture performance. Copyright © 2007 John Wiley & Sons, Ltd.

Building genuine trust through interpersonal emotion management: A threat regulation model of trust and collaboration across boundaries

Abstract: I introduce the construct of threat regulation as an agentic interpersonal process for building and maintaining trust. I examine threat regulation as a specific dimension of interpersonal emotion management that fosters trust and effective cooperation by allowing individuals to understand and mitigate the harm that their counterparts associate with cooperating—in particular, harm from opportunism, identity damage, and neglect of their interests. To explicate the microprocesses of threat regulation, I draw on social cognitive theory, symbolic interactionism, and the psychology of emotion regulation.

An embeddedness framing of governance and opportunism: towards a cross‐nationally accommodating theory of agency

Abstract: An embeddedness framing of governance and opportunism : towards a cross-nationally accommodating theory of agency

Overcoming export manufacturers’ dilemma in international expansion

Abstract: Learning and acquiring local market knowledge from foreign distributors are central to manufacturers’ export market performance. Drawing from the resource-based view, we propose that manufacturers need to develop stronger local market competence while simultaneously minimizing the costs of distributor opportunism in order to compete successfully in the export market. Cultural distance and other barriers, however, may hinder the development of local market competence for the manufacturer while contributing to the occurrence of distributor opportunism. In order to overcome these barriers, we examine the impact of three alternative forms of manufacturer governance – trust, knowledge sharing, and contract-based relationship – in export channels. Findings suggest that all three governance mechanisms contribute to enhancing the manufacturer's competence to exploit local market opportunity. However, of the three, trust seems to be the only effective way to curtail distributor opportunism.

An integrated anti-opportunism system in international exchange

Abstract: Building on economic and social exchange theories, this study develops an integrated model in which curtailing opportunism in international joint ventures (IJVs) requires four interrelated sets of suppressing forces: (1) contractual ordering (contractual inclusiveness and contractual obligatoriness); (2) structural ordering (managerial governance and equity captiveness); (3) relational ordering (interparty attachment and boundary-spanner ties); and (4) justice ordering (procedural justice and distributive justice). Using a sample of 192 IJVs in an emerging market, this study finds general support for our theoretical model. Our research validates that countering opportunism involves a system-wide effort that integrates economic and social mandates, unifies ex ante and ex post mechanisms, controls both egoistic and non-egoistic motivations, and combines organizational-level and individual-level forces. For partners from individualist cultures, economic ordering forces (contractual and structural) are stronger than social ordering forces (relational and justice) in relation to opportunism resistance, whereas for partners from a collectivistic culture, social ordering forces are relatively stronger than economic ordering forces for this end.

Just Rewards?Local Politics and Public ResourceAllocation in South India

Abstract: This paper uses data on elected village councils in South India to examine thepolitical economy of public resource allocation. We find that the pattern ofpolicy-making reflects politicians' self-interest. Elected councillors benefit fromimproved personal access to public resources. In addition, the headcouncillor's group identity and residence influences public resource allocation.While electoral incentives do not eliminate politician opportunism, votersappear able to use their electoral clout to gain greater access to publicresources.

The Mythical Benefits of Shareholder Control

Abstract: In 'The Myth of the Shareholder Franchise', Professor Lucian Bebchuk argues that the notion that shareholders in public corporations can remove directors is a myth. The same argument was made by Berle and Means in 1932. Not only is shareholder power to remove directors largely a myth in U.S. public companies, it has been widely recognized as a myth for three-quarters of a century. What should we conclude from this? Professor Bebchuk concludes the time has come to make shareholder power a reality. But there are many myths - vampires, alligators in the sewers - we would not want to make real. Part I of this Response to Professor Bebchuk's article argues that we should not want to make shareholder power to oust directors more real because, while board control worsens agency costs, it offers important economic benefits to shareholders as well. In particular, board control promotes efficient and informed decisionmaking; discourages intershareholder opportunism; and encourages valuable specific investment in corporate team production. Because board control has costs and benefits, theory cannot tell us whether we should make it easier for shareholders to oust directors. We must look to the evidence. Part II concludes the evidence does not support Bebchuk's proposal. To the contrary, it suggests shareholders in public firms reap net benefits from board control. Why then do so many observers believe shareholders need more power over boards? Part III argues that calls for shareholder democracy appeal to the media and many observers not because they are based on evidence, but because of emotion. The emotional appeal of shareholder power can be traced to three sources; the common but misleading metaphor that shareholders own corporations; the opportunistic calls of activists seeking leverage over boards for self-interested reasons; and a strong but unfocused sense that something (anything!) should be done in the wake of recent corporate scandals. The result has been widespread propagation of a second myth - the myth that shareholder control of public companies benefits shareholders. The Response concludes by reminding readers of the dangers of policymaking based on myth rather than evidence, using the cautionary case of stock options.

The Institutional Economics of Corruption and Reform

Abstract: Corruption has been a feature of public institutions for centuries yet only relatively recently has it been made the subject of sustained scientific analysis. Lambsdorff shows how insights from institutional economics can be used to develop a better understanding of why corruption occurs and the best policies to combat it. He argues that rather than being deterred by penalties, corrupt actors are more influenced by other factors such as the opportunism of their criminal counterparts and the danger of acquiring an unreliable reputation. This suggests a novel strategy for fighting corruption similar to the invisible hand that governs competitive markets. This strategy - the 'invisible foot' - shows that the unreliability of corrupt counterparts induces honesty and good governance even in the absence of good intentions. Combining theoretical research with state-of-the-art empirical investigations, this book will be an invaluable resource for researchers and policy-makers concerned with anti-corruption reform.

The institutional economics of corruption and reform

Abstract: Corruption has been a feature of public institutions for centuries yet only relatively recently has it been made the subject of sustained scientific analysis. Lambsdorff shows how insights from institutional economics can be used to develop a better understanding of why corruption occurs and the best policies to combat it. He argues that rather than being deterred by penalties, corrupt actors are more influenced by other factors such as the opportunism of their criminal counterparts and the danger of acquiring an unreliable reputation. This suggests a novel strategy for fighting corruption similar to the invisible hand that governs competitive markets. This strategy - the 'invisible foot' - shows that the unreliability of corrupt counterparts induces honesty and good governance even in the absence of good intentions. Combining theoretical research with state-of-the-art empirical investigations, this book will be an invaluable resource for researchers and policy-makers concerned with anti-corruption reform.

The ambiguous relationship of ICT and organizational performance: a literature review

Abstract: Purpose – The purpose of this paper is to focus on the ambiguous relationship of information and communication technologies (ICT) in the relationship between small suppliers and their multinational enterprise (MNE) customers.Design/methodology/approach – This is a literature review paper which develops a conceptual model of IT‐mediated relationships between small suppliers and large MNE customers. The framework integrates transaction cost economics (TCE) and resource based theory (RBV) perspectives and argues that ICT integration both facilitates coordination and monitoring but also impacts on partner opportunism. It is argued that ICT integration can enhance supplier performance given certain circumstances.Findings – The paper clarifies the ambiguous nature of the power‐dependence relationship between small suppliers and their multinational customers.Originality/value – ICT both facilitates the governance relationship, balances the power between these key players but also heightens ability to exert contr...

The impact of electronic reverse auctions on supplier performance: The mediating role of relationship variables

Abstract: The use of electronic reverse auctions (ERAs) by buying organizations has increased dramatically over the past five years. Both anecdotal and empirical evidence have shown that ERAs can lower purchase prices. However, researchers are only just beginning to investigate how ERAs impact perceptions of opportunism as compared to sealed bids and traditional negotiations. Further, researchers have yet to examine how perceptions of opportunism surrounding ERAs might in turn affect such outcome variables as trust, commitment, conflict, and ultimately nonprice attributes of supplier performance. The authors address this gap in the research by developing a theoretically grounded model of the interrelationships among these five variables, and empirically testing the model through a survey of buying organizations that rely heavily on ERAs to select and source from suppliers. The authors' findings suggest that increased levels of opportunism harm supplier nonprice performance, through both their more obvious impact on dysfunctional conflict and their more latent effects on relationship trust and commitment.

Information Systems Outsourcing: Linking Transaction Cost and Institutional Theories

Abstract: In this article, we apply transaction cost theory (TCT) and institutional theory to the realm of IS outsourcing. TCT posits that firm’s outsourcing governance is influenced by transaction cost factors, namely, bounded rationality, opportunism, and risk. Institutional theory, on the other hand, has been advocated to explain non-choice behavior of organizations in the context of competitors, norms, and professional associations. Although TCT has been used extensively in the extant literature to study outsourcing arrangements, we argue that as IS outsourcing practices propagate in organizational fields, TCT explanations will take a back seat to institutional explanations. We appropriate the transaction cost framework to the IS outsourcing setting and consider when and how firm’s decision to adopt outsourcing and corresponding ex-ante screening and ex-post monitoring of the vendor will be influenced by mimetic, normative, and coercive institutional pressures. More specifically, we argue that greater the density and rate of adoption in outsourcing during innovation diffusion and stability stages, the greater the possibility that transaction cost factors will be replaced by institutional factors in explaining firms’ governance structures (decision to adopt outsourcing, and corresponding screening and monitoring). Conversely, we posit that when the institutional pressures are relatively weak, TCT better explains the intricacies of IS outsourcing arrangements. In conclusion, future research directions and managerial implications of the institutional environment on IS outsourcing governance are discussed.

An Institutional Economic Reconstruction of Scientific Management: On the Lost Theoretical Logic of Taylorism

Abstract: I argue that Taylor was a pioneer in theorizing principles of institutional economics, and I challenge conventional preconceptions that scientific management is theoretically unsophisticated and aimed at disadvantaging certain organization members. I identify in Taylor's writings the institutional economic ideas of dilemmatic interaction conflict regarding capital contributions and capital distributions, conflict resolution through incentives management, mutual gains as the outcome of conflict resolution, and the model of economic man, and I suggest that Taylor's behavioral concept of hearty cooperation deviated from the economic principles he had espoused regarding worker opportunism.

Asset specificity and vertical integration

Abstract: Asset specificity is usually considered to be an argument for vertical integration. The main idea is that specificity induces opportunistic behavior, and that vertical integration reduces the cost of preventing opportunism. In this paper I show that asset specificity can be an argument for non-integration. In a repeated-game model of self-enforcing relational contracts, it is shown that when parties are non-integrated, increasing degrees of asset specificity make it possible to design relational contracts with higher-powered incentives.

An integrated study of entrepreneurs' opportunism

Abstract: Purpose – The purpose of this paper is, first, to provide a comprehensive discussion about entrepreneur opportunism's antecedents (uncertainty, information asymmetry, asset specificity and relational exchange) and consequences (transaction cost, trust, commitment, performance, and cooperation) and, second, to construct a model by linking entrepreneurs' opportunism and its antecedents and consequences.Design/methodology/approach – The paper tests the theoretical construction empirically. In total, 200 retailers of the computer industry in Taiwan participated in the investigation. The linear regression analysis is applied to the tests of the hypotheses.Findings – The study finds that uncertainty and information asymmetry induce the generation of entrepreneurs' opportunism, while asset specificity and relational exchange can be used to lower entrepreneurs' opportunism. Entrepreneurs' opportunism incurs transaction costs and lowers trust, commitment, performance, and cooperation.Research limitations/implicati...

SME adoption of e-Commerce in the Central Okanagan region of Canada

Abstract: The adoption of e-commerce by small-medium enterprises (SME) in Canada remains low. The Central Okanagan region of British Columbia is typical in terms of the relative density of SMEs’ e-commerce activity. In this study, a survey of SMEs’ adoption of e-commerce was conducted to determine reasons for this low adoption. Constructs used in the survey focussed on three contexts: organizational, external environmental and innovation. The study found significant factors that differentiated adopters and non-adopters of e-commerce included technological opportunism and readiness, owner experience with computers, support within the organization, relative advantage and compatibility. Limitations of the study’s sample size preclude generalization to all Canadian SMEs, but the trends suggest that further research should be a priority for government, industry and research academics.

Innovation and Corporate Governance: The Impact of Sarbanes-Oxley

Abstract: This Article shows that innovation is a process that has specific characteristics, that these characteristics give rise to an important corporate governance tradeoff, and that complying with the Sarbanes-Oxley Act (SOX) likely impacts this tradeoff to the detriment of innovation.Innovation is a process that results in new goods, services, methods of production, and forms of business organization. Innovation can vastly improve the welfare of consumers, investors, firms, and the economy. Decentralization and an emphasis on strategic internal control are governance structures that facilitate innovation. The ultimate purpose of these structures is to induce managers to overcome myopia and undertake the types of long-term, risky, dynamic, and knowledge-intensive activities that result in innovation.Innovation-facilitating structures and activities may, however, also increase the ability of managers to benefit themselves at the expense of investors. Value-maximizing companies must therefore negotiate the tradeoffs between reducing myopia and preventing managerial opportunism. SOX requires all public companies to increase objective monitoring of managers by outsiders to reduce opportunism. However, a substantial portion of innovative companies likely maximize value by placing a greater emphasis on proximate monitoring by insiders than SOX permits. The law thus upsets the optimal governance balance in such companies and likely undermines their ability to provide the most value to investors and consumers.

Preventing post‐contractual opportunism by an option to switch from one contract to another

Abstract: This article proposes a pre‐emptive mechanism that prevents a self‐interested contractor from taking benefits resulting from any post‐contractual opportunism. The mechanism is based on an option to switch from one contract to another. The client and the contractor must simultaneously enter into two (or more) contracts with an option given to the client to decide which one will apply once the work has been completed. The client's advantage lies in the power of preventing the contractor's opportunistic behaviour. The contractor's advantage lies in the possibility to demonstrate good faith.

The efficacy of alternative mechanisms in safeguarding specific investments from opportunism

Abstract: Purpose – Transaction‐specific investments are often required in marketing channels in order to improve channel efficiency. However, such investments often increase the risk of opportunistic behaviors being sparked off. This paper aims to analyze the role of partners' investments in specific assets and the development of relational norms as safeguarding mechanisms against opportunism.Design/methodology/approach – Three hypotheses are developed in line with transaction cost economics and relational exchange theories. The hypotheses are tested on a sample of 479 manufacturer‐distributor relationships in the food sector in Spain.Findings – The paper finds that partner‐specific investments and relational norms are effective mechanisms against opportunism. However their efficacy differs depending on which opportunism (supplier's or distributor's) is to be avoided.Research limitations/implications – The paper focuses on two mechanisms, yet there are other safeguards that firms can employ.Practical implications ...

Is agency theory self‐activating?

Abstract: This article examines the conditions under which the principal-agent model is self-activating/socially causal. We do so by exploring a principal-agent framework that allows for the possibility that rational agents may hold intrinsic preferences for autonomy in decision making and experience disutility from being monitored. Using a dynamic model of preference formation, we identify conditions under which the principal-agent model is self-activating in that, over time, the introduction of the model in an otherwise efficient monitor-worker relationship leads to the inefficient adoption of the agency model. We also examine the extent to which the agency model is robust when autonomy-preferring agents are introduced into the population. (JEL G30, L20, C72) I. INTRODUCTION As a social science, economics seeks to both explain and influence behavior. This in turn fosters a constructive process of self-assessment of the economic approach to decision making. For example, in examining the effect of exposure to economics and differences in cooperativeness in the Prisoner's Dilemma, Frank, Gilovich, and Regan (1993) report that economics students were statistically more likely to frame the objective of the game in self-interested terms and to refer exclusively to the features of the game itself in explaining their strategy choices, rather than considering issues such as fairness, trust, or social norms. Frey and Meier (2003) offer a more distilled view; they use a nonlaboratory experiment (voluntary student contributions to two university funds), with an eye toward examining whether self-interested students self-select into economics (selection bias) or self-interested behavior is a consequence of indoctrination. Surprisingly, their most significant variable was the study of business economics, which obviated both the self-selection and indoctrination effects. By contrast, those with primary training in political economy exhibited neither effect. In examining a dilemma in which subjects were forced to weigh their commitment to profit maximization against concern for workers who would be fired as a consequence of profit maximization during a time of high unemployment, Rubinstein (2006) found that economics students were statistically more likely to adhere to the profit-maximization criterion. Similarly, Israeli readers of a business daily who had a BA in economics or an MBA laid off more workers in the same survey. One area where economic theory has played a significant role in both framing the issues and training the affected parties is executive compensation, particularly the principal-agent model. Beginning with Berle and Means (1932), agency theorists have recognized the need to overcome problems stemming from the separation of ownership and control in public corporations, for example, Jensen and Meckling (1976). Further, not only are the lessons from the principal-agent model widely taught but its operationalization is also recognized within the popular press as the intellectual foundation for the shareholder value movement within Corporate America, as well as the doubling of the number of chief executives who were offered stock option plans from 1980 to 1994.1 Whether seen as the embodiment of "best practice" or as the impetus for corporate avarice, it cannot be denied that the operationalization of agency theory has revolutionized the culture of Corporate America. Further, Bebchuck and Fried's (2004) finding that the design of compensation schemes creates its own agency problems reinforces the core assumption of opportunistic behavior in agency theory. The principal-agent model is an example of a widely disseminated theory in which those who are exposed to it are expected both to put it into practice and have it practiced on them. Consequently, the model raises expectations about the usefulness and occurrence of incentive-based compensation schemes through its underlying assumptions about agents' opportunism. …

An Empirical Examination of the Role of Social Exchanges in Alliance Performance

Abstract: Strategic alliances have become a major corporate strategy in many high-tech industries such as electronics, telecommunication, pharmaceutical, and machine tools industries (Gulati et al., 2000; Yoshino and Rangan, 1995). Strategic alliances allow firms to develop new competencies quickly, and rapidly expand in geographically disperse locations offering the greatest levels of opportunity and flexibility (Dyer and Singh, 1998; Gulati et al., 2000). While alliances are becoming an attractive option, many strategic alliances have been unstable, ineffective and poorly performing (Arino and Doz, 2000). The potential for conflict and a clash of interest between alliance partners is inherent, because either party can opportunistically use the alliance to learn the other's business or technological secrets (Doz, 1996; Khanna et al., 1998). Previous alliance research has focused on this issue of partner opportunism and has adopted a transaction cost economics view (Pisano, 1989; Williamson, 1991) to argue that high transaction costs resulting from opportunistic behavior can be alleviated through appropriate contractual controls or equity-based ownership controls (Kogut, 1988; Pisano, 1989). These views, however, neglect the fact that the cost of deterring opportunism is very high and excessive controls may increase coordination costs (Ring and Van de Ven, 1994) and intensify power conflicts between alliance partners (Provan and Skinner, 1989; Steensma and Lyles, 2000; Yan and Gray, 1994). The challenges posed by alliances have encouraged scholars to look beyond the issue of partner opportunism and explore the evolutionary collaborative processes (Arino and Doz, 2000) and, specifically, the role of social ties such as trust in enhancing alliance performance (Doz, 1996; Lazaric, 1998; Ring and Van de Ven, 1994). While some researchers have examined the relationship between interfirm trust and alliance performance (Inkpen and Curall, 1998; Luo, 2002; Sako, 2000; Zaheer et al., 1998), others have argued that several factors such as risk and uncertainty, cultural diversity of partners, and resource dependence (Elangovan and Shapiro, 1998; Luo, 2002) affect the relationship between trust and alliance performance. Thus, there is a need for research into the role of other social exchanges such as reciprocal resource commitments and relational influence between partners that will ensure collaboration and alliance success (Das and Teng, 1998; Gundlach et al., 1995; Steensma and Lyles, 2000; Subramani and Venkatraman, 2003). Because reciprocity and mutual influence between partners are tangible norms and manifest as mutual control and power sharing or joint decision making, they can very well supplement trust in collaboration (Das and Teng, 1998; Dekker, 2004; Provan and Gassenheimer, 1994; Steensma and Lyles, 2000). In addition, there is a need to understand why a partner will have a greater or lesser amount of trust for another party. That is, what are the specific attributes of the partners that enhance trust in the alliance? In this study, we conceptualize trust in terms of trustworthiness based on skills, integrity, and benevolent attitudes of the partner as perceived by the focal firm, and examine the managerial perceptions related to all significant ongoing social exchanges between alliance partners. Since most conflicts occur in the routine aspects of the interaction, successful alliance management is essentially a social process. From the focal firms' perspective, we examine the relationships between social exchanges (reciprocity, trust, and mutual influence) and alliance success in terms of perceived alliance performance and partner's propensity to continue the alliance. THEORY AND HYPOTHESES Social Exchanges and Alliance Coordination "Social exchange" is a condition in which the actions of one party provide the rewards and incentives for the actions of another party and vice versa in repeated interactions (Blau, 1964; Homans, 1961). …

Organizational Change and the Economics of Management Consulting: A Response to Sorge and van Witteloostuijn

Abstract: This essay responds to Sorge and van Witteloostuijn (2004) and argues that consulting firms play an important economic role in helping organizations trigger and deal with change. Sorge and van Witteloostuijn claim that management consultancy is a business in which clients buy into hype-driven and unsubstantiated advice, and they imply that consultants yield returns from short-term opportunism based on information asymmetries. We propose that clients have several sources for assessing consulting service quality, and word-of-mouth effects discourage short-term opportunism of consultants. We also question Sorge and van Witteloostuijn's view that the need for organizations to change is largely a myth. We present data on economic changes over the last three decades to which firms had to respond and continue to do so. Accordingly, we argue that the continuing demand for consultancy is genuine, rather than induced by hype.

Too much to die, too little to live: unemployment, higher education policies and university budgets in Germany

Abstract: German educational spending per student has dramatically declined since the early 1970s. In this paper, we develop a theory of fiscal opportunism and argue that state governments exploit higher educational policies as an instrument of active labour market policy. By ‘opening’ universities to the masses and the extensive propagation of broader university enrolment during times of economic distress, state governments have an instrument at their disposal for lowering unemployment without generating negative budgetary implications. Thereby, the government pockets voter support not only by diminishing unemployment, but also by providing public goods particularly to the socially disadvantaged. At the same time, the state government risks a deterioration of educational quality owing to decreasing educational spending per student. We test our theoretical claims for the German states in a period ranging from 1975 to 2000 by means of panel fixed-effects models. The empirical results robustly support the hy...

An embeddedness framing of governance and opportunism: towards a cross‐nationally accommodating theory of agency—critique and extension

Abstract: Research on corporate governance has been increased in recent years, reflecting growing concern about the future of global capitalism. Much of this research has been under socialized. Lubatkin and colleagues attempt to address this serious shortcomings of past research. While making an important and informative contribution to research, I believe these authors overlook the questionable assumptions of agency models of governance. Lubatkin and colleagues also key issues resulting from the internationalization of corporate governance. Copyright © 2006 John Wiley & Sons, Ltd.