Showing papers on "Opportunism published in 2009"
TL;DR: In this article, the authors investigated the role of transactional and relational mechanisms in hindering opportunism and improving relationship performance in an emerging economy, and found that transactional mechanisms are more effective in restraining opportunism while relational mechanisms were more powerful in improving the relationship performance.
652 citations
TL;DR: In this article, the authors developed a comprehensive model integrating performance-enhancing mechanisms and antecedent processes of trust in import-export relationships and found that existing levels of trust have a positive effect on relationship performance outcomes achieved 1 year later.
Abstract: Trust is a central construct in relationship marketing. Yet the literature provides mixed empirical evidence on the trust–performance linkage. Also, there is limited research on how to build trusting international buyer–seller relations. We develop a comprehensive model integrating performance-enhancing mechanisms and antecedent processes of trust in import–export relationships. Our survey results from importers trading with overseas manufacturers suggest that existing levels of trust have a positive effect on relationship performance outcomes achieved 1 year later. Importantly, trust takes on greater importance in enhancing performance under conditions of high interdependence, whereas in circumstances of low interdependence trust has no discernible effect. The findings also indicate that interfirm psychic distance, internal uncertainty, and exporter transaction-specific assets and opportunism are related to importer trust. Implications for academics and practitioners are addressed.
299 citations
TL;DR: In this paper, a sample of procurement relationships between Hong Kong trading firms and their Chinese suppliers using SEM methods was used to test the predictions of relational exchange theory more than those of transaction cost economics.
250 citations
TL;DR: In this article, the authors propose the envelope concept of bounded reliability (BRel), an assumption that represents more accurately and more completely the reasons for failed commitments, without invalidating the other critical assumption in conventional transaction cost economics (TCE) thinking, namely the widely accepted envelope concept, namely bounded rationality (BRat).
Abstract: Modern transaction cost economics (TCE) thinking has developed into a key intellectual foundation of international business (IB) research, but the Williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism. In this paper we assess both the opportunism concept and existing alternatives such as trust within the context of IB research, especially work on multinational enterprise (MNE) governance. Case analyses of nine global MNEs illustrate an alternative to the opportunism assumption that captures more fully the mechanisms underlying failed commitments inside the MNE. As a substitute for the often-criticized assumption of opportunism, we propose the envelope concept of bounded reliability (BRel), an assumption that represents more accurately and more completely the reasons for failed commitments, without invalidating the other critical assumption in conventional TCE (and internalization theory) thinking, namely the widely accepted envelope concept of bounded rationality (BRat). Bounded reliability as an envelope concept includes two main components, within the context of global MNE management: opportunism as intentional deceit, and benevolent preference reversal. The implications for IB research of adopting the bounded reliability concept are far reaching, as this concept may increase the legitimacy of comparative institutional analysis in the social sciences.
248 citations
TL;DR: It is argued that contract design is multidimensional, and that it is necessary to design governance structures that can protect user firms from shirking and monitoring costs, as well as provide for efficient adaptation when requirements are incompletely specified at the start of the initiative.
Abstract: Application service providers (ASP), which host and maintain information technology (IT) applications across the Internet, offer an alternative to traditional models of IT service for user firms. We build on prior literature in transaction cost economics (TCE) to argue that the contract design should address ex post transaction costs that result due to contractual incompleteness and opportunism. We argue that contract design is multidimensional, and that it is necessary to design governance structures that can protect user firms from shirking and monitoring costs, as well as provide for efficient adaptation when requirements are incompletely specified at the start of the initiative. Our empirical analysis suggests that factors such as uncertainty in specifying service requirements, interdependence between the ASP application and IT systems in the client organization, and the need for specific investments favor time and materials contracts, whereas fixed prices are desirable when strong incentives are needed for cost reduction. We also find that contracts that are aligned with transaction attributes in a transaction cost-economizing manner are significantly less likely to experience budget overruns and realize better ex post performance than those that are not. These results hold normative implications for both user and provider firms to assess the performance implications of choosing contracts in line with prescriptions of TCE.
141 citations
TL;DR: In this article, the authors argue that the vertical disintegration of the supply chain in many industries is mediated neither by fully specifi ed technical interfaces that allow suppliers to produce a modular piece of the ultimate product, nor by entirely implicit relational contracts supported by norms of reciprocity and the expectation of future dealings.
Abstract: Rapidly innovating industries are just not behaving the way theory expected. Conventional industrial organization theory predicts that when parties in the supply chain have to make transaction-specifi c investments, the risk of opportunism will drive them away from contracts and toward vertical integration. Despite the conventional theory, contemporary practice is moving in the other direction. Instead of vertical integration, we observe vertical disintegration in a signifi cant number of industries, as producers recognize that they cannot themselves maintain cutting-edge technology in every fi eld required for the success of their product. In doing this, the parties are developing forms of contracting beyond the reach of contract theory models. In this Article, we connect the emerging contract practice to theory, learning from what has happened in the real world to frame a theoretical explanation of this cross-organizational innovation and to reconceptualize the boundaries of the fi rm accordingly. We argue that the vertical disintegration of the supply chain in many industries is mediated neither by fully specifi ed technical interfaces that allow suppliers to produce a modular piece of the ultimate product, nor by entirely implicit relational contracts supported only by norms of reciprocity and the expectation of future dealings. Rather, we suggest that the change in the boundary of the fi rm has given rise to a new form of contracting between fi rms - what we call contracting for innovation. This pattern braids explicit and implicit contracting to support iterative collaborative innovation by raising switching costs. These costs, represented by the parties’ parallel investment in transaction specifi c investment in knowledge about their collaborators’ capacities, deter opportunism under circumstances when explicit contracting, renegotiation and the anticipation of future dealings cannot.
136 citations
TL;DR: In this article, the authors investigate how well general theories of organization correspond to governance in offshoring relationships, and they find that trust and long-term orientation govern the offshored process or processes.
101 citations
TL;DR: This paper explored how relationship-specific investment (RSI) enhances interfirm cooperation in buyer-supplier partnerships in an emerging market and concluded that RSI is not a direct performance propeller but an important builder of relational infrastructure in which mid-range processes are nourished.
Abstract: This study explores how relationship-specific investment (RSI) enhances interfirm cooperation in buyer–supplier partnerships in an emerging market. Building upon the logic of economic sociology, we argue that the contribution of RSI to the success in buyer–supplier partnerships will be mediated by reduced opportunism and reduced conflict and by heightened commitment and knowledge sharing. Our survey of 216 paired distributors (buyers) and manufacturers (suppliers) in China generally supports this argument, leading to a conclusion that RSI is not a direct performance propeller but an important builder of relational infrastructure in which mid-range processes are nourished. Theoretical implications in strategic management and supply chain management research are highlighted.
83 citations
TL;DR: In this paper, the authors draw on agency theory and the resource-based view to hypothesize that family and non-family businesses differ in the capital they deploy and the way they deploy it.
Abstract: We draw on agency theory and the resource-based view to hypothesize that family and non-family businesses differ in the capital they deploy and the way they deploy it, and test this in a large UK sample of 319 family business and 258 non-family business owner/managers. We find that adverse selection, opportunism and niche marginalization is more prevalent among family business owner/managers. Yet their businesses are similar to their non-family business peers in performance outcomes such as size and growth. We suggest that weaknesses in human and financial capital choice are offset by strengths in the social capital of family firms.
59 citations
TL;DR: The authors compare two institutions for allocating the proceeds of team production: revenue-sharing and leader-determined shares, and find that most leaders forego the temptation to appropriate team output and manage to curtail free riding.
Abstract: We use an experiment to compare two institutions for allocating the proceeds of team production. Under revenue-sharing, each team member receives an equal share of team output; under leader-determined shares, a team leader has the power to implement her own allocation. Both arrangements are vulnerable to opportunistic incentives: under revenue-sharing team members have an incentive to free ride, while under leader-determined shares leaders have an incentive to seize team output. We find that most leaders forego the temptation to appropriate team output and manage to curtail free riding. As a result, compared to revenue-sharing, the presence of a team leader results in a significant improvement in team performance.
50 citations
TL;DR: In this article, the authors focus on the practice of networking within the business context and argue that virtuous networking requires acting with good faith, sharing honest goals, and participating in licit activities; sharing information, knowledge, and resources with reciprocity and even with gratuity; serving with justice in asymmetrical power relationships; and exercising a positive ethical influence within the network.
Abstract: Focusing on the virtue-ethics tradition, this article analyzes the practice of networking within the business context. First, it distinguishes three types of networking: utilitarian, emotional, and virtuous. Virtuous networking does not exclude utilitarian and emotional networking, but these latter forms should be practiced with reciprocity. It is argued that virtuous networking requires (1) acting with good faith, sharing honest goals, and participating in licit activities; (2) sharing information, knowledge, and resources with reciprocity and even with gratuity; (3) serving with justice in asymmetrical power relationships; and (4) exercising a positive ethical influence within the network. Specific forms of unethical behavior in the practice of networking include (1) bad faith or abuse of trust, (2) opportunism, (3) abuse and misuse of power, (4) network cronyism, (5) networking as disguised bribery, and (6) cooperating in the wrongdoing of other actors of the network. The article concludes with some remarks about the role of ethics in social networks.
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TL;DR: In this article, the authors provide experimental evidence that such disclosures are not sufficient for non-professional investors to identify those firms that are opportunistic in their estimates, and they also offer evidence suggesting that the value of these disclosures can be enhanced when nonprofessional investors seek out information about the estimate accuracy of other firms in the industry (i.e., consensus information).
Abstract: To curb opportunism in financial reporting, scholars and regulators have proposed that firms be required to report reconciliations of prior year estimates. We provide experimental evidence that such disclosures are not sufficient for non-professional investors to identify those firms that are opportunistic in their estimates. We also offer evidence suggesting that the value of these disclosures can be enhanced when non-professional investors seek out information about the estimate accuracy of other firms in the industry (i.e., consensus information). Our study provides insights about these disclosures and the mechanisms that enhance their effectiveness. Our findings have broad implications for standard setters and future research designed to assist in identifying opportunistic management behavior.
TL;DR: In this paper, the authors investigate the effect of influence on the extent to which relational norms characterize the channel exchange and find that relational norms have an asymmetric effect across coercive and non-coercive influence strategies.
Abstract: In an empirical study of the North American lodging industry, we investigate the efficacy of influence strategies for managing opportunism in marketing channels. We posit that the effects of influence strategies upon opportunism are moderated by the extent to which relational norms characterize the channel exchange. The results support this moderating effect. In particular, we find that relational norms have an asymmetrical effect across coercive and noncoercive influence strategies. With high relational norms in the relationship, a channel member’s use of noncoercive influence strongly limits partner opportunism whereas the use of coercive influence exacerbates partner opportunism. In contrast, noncoercive influence intensifies and coercive influence mitigates partner opportunism under conditions of low relational norms. These findings offer first insights for curbing opportunism in marketing channel relationships with the simultaneous use of different socialization mechanisms.
TL;DR: In this article, the authors investigate the role of transaction-specific investments in marketing channels for North American hotel services and show the conditions under which specific investments protect against opportunism and enhance a firm's performance.
Abstract: We investigate simultaneously the safeguarding and value-creating roles of transaction-specific investments in marketing channels for North American hotel services. Our results show the conditions under which specific investments protect against opportunism and enhance a firm's performance. They also indicate that these results depend upon the type of transaction-specific investment-physical assets versus knowledge-based or human assets. Finally, our findings demonstrate that more extensive relational norms within hotel channels can negatively affect the performance-enhancing role of physical transaction-specific investments-more evidence of the "dark side" of close relationships.
01 Feb 2009
TL;DR: In this article, the authors argue that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e. group, organization, or network).
Abstract: Knowledge of the firm, combinative capabilities, and the replication of technology - How should we understand why firms exist? A prevailing view has been that they serve to keep in check the transaction costs arising from the self-interested motivations of individuals. We develop in this article the argument that whal firms do better than markets is the sharing and transfer of the knowledge of individtials and groups within an organization. This knowledge consists of information (e.g., who knows what) and of know-how (e.g., how to organize a research team). What is central to our argument is that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e.. group, organization, or network). If knowledge is only held at Ihe individual level, then firms could change simply by employee turnover. Because we know that hiring new workers is not equivalent to changing the skills of a firm, an analysis of what firms can do must understand knowledge as embedded in the organizing principles by which people cooperate within organizations. Based on this discussion, a paradox is identified: efforts by a firm to grow by the replication of its technology enhances the potential for imitation. By considering how firms can deter imitation by innovation, we develop a more dynamic view of how firms create new knowledge. We build up this dynamic perspective by suggesting that firms learn new skills by recombining their curreni capabilities. Because new ways of cooperating cannot be easily acquired, growth occurs by building on the social relationships that currently exist in a firm. What a firm has done before tends to predict what it can do in the future. In this sense, the cumulative knowledge of the firm provides options to expand in new but uncertain markets in the future. We discuss at length the example of the make/buy decision and propose several testable hypotheses regarding the boundaries of the firm, without appealing to the notion of opportunism.
TL;DR: In this paper, the authors examined the determinants of forming a governance committee and whether such a committee constrains managerial opportunism and found that firms with a larger, more independent, and more active board, higher agency costs, and past occurrence of class-action lawsuits are more likely to voluntarily form a committee.
Abstract: Manuscript Type: Empirical
Research Question/Issue: This study examines the determinants of forming a governance committee and whether such a committee constrains managerial opportunism.
Research Findings/Insights: This study examines a sample of S&P 1,500 firms over the period of 1996 to 2002. It finds that firms with a larger, more independent, and more active board, higher agency costs (as indicated by lower managerial ownership and lower takeover vulnerability), and past occurrence of class-action lawsuits are more likely to voluntarily form a governance committee. This study also provides evidence that having a governance committee brings real consequences in that it constrains managerial opportunism by reducing aggressive financial reporting.
Theoretical/Academic Implications: Consistent with substitution theory, this study documents that a firm is more likely to form a governance committee to compensate for its severe agency problems. It also demonstrates that delegating some corporate governance duties to a specific board committee could improve the effectiveness of board monitoring.
Practitioner/Policy Implications: This study provides insights to regulators who are interested in regulating board structure. It suggests that whether a firm needs to form a governance committee is endogenously determined by the firm's characteristics when the firm has an independent board. In addition, this study documents that a voluntarily formed governance committee is able to mitigate agency costs in the form of constraining managerial accounting discretion.
TL;DR: In this article, a multidimensional perspective of exchange partners' Machiavellianism was developed to reveal different types of opportunistic motivations in exchange relationships and to extend knowledge of socialization as a safeguard.
Abstract: Purpose – Retailers are increasingly forced to enter negotiations with new suppliers and have less time to develop trusting relationships prior to awarding sourcing contract. Such supplier negotiations are often guided by self‐interest‐seeking behavior. However, not all exchange partners behave opportunistically when given the opportunity and little is known about how and when opportunism actually occurs. This research seeks to develop a multidimensional perspective of exchange partners' Machiavellianism that reveals different types of opportunistic motivations in exchange relationships and to extend knowledge of socialization as a safeguard by investigating the efficacy of signaling trustworthiness as a means of reducing the risk of opportunistic behavior in exchanges with partners with different moral standards about opportunism.Design/methodology/approach – The data consist of a sample of 259 purchasing professionals who are members of the Institute of Supply Chain Management and report on their negoti...
Abstract: Politicians are often assumed to be opportunistic. This article examines both whether there is a limit to this opportunism and whether voters reward policy makers for opportunistic behaviour. By looking at currency crisis situations, the article presents a graphic rational opportunistic political business cycle model in which incumbents face a tradeoff between their wish to signal competence and the economic constraints imposed by the crisis. It analyses how electoral incentives affect policy makers' management of currency crises and how this management in turn affects the subsequent election outcome. The empirical results of probit models with selection using a sample of 122 crises in 48 industrial and developing countries between 1983 and 2003 confirm the model's prediction that under certain circumstances some types of policy makers do indeed have incentives to deviate from optimal policy in the run-up to elections - and that voters reward this behaviour by re-electing policy makers who follow such strategies. However, there is a limit to the readi- ness to manipulate: when speculative pressure is too severe, incumbents no longer manipu- late policy but implement the least painful policy option instead.
TL;DR: In this paper, the authors present a new approach for analysis and improvement of governance of agro-ecosystem services, taking into account the role of specific institutional environment (formal and informal rules, distribution of rights, systems of enforcement); behavioral characteristics of individual agents (preferences, bounded rationality, opportunism, risk aversion, trust); and transactions costs associated with ecosystem services and their critical factors (uncertainty, frequency, asset specificity, appropriability); and comparative efficiency of market, private, public and hybrid modes of governance.
Abstract: In this paper we incorporate interdisciplinary New Institutional and Transaction Costs Economics (combining Economics, Organization, Law, Sociology, Behavioral and Political Sciences), and suggest a framework for analysis of mechanisms of governance of agro-ecosystem services. Firstly, we present a new approach for analysis and improvement of governance of agro-ecosystem services. It takes into account the role of specific institutional environment (formal and informal rules, distribution of rights, systems of enforcement); and behavioral characteristics of individual agents (preferences, bounded rationality, opportunism, risk aversion, trust); and transactions costs associated with ecosystem services and their critical factors (uncertainty, frequency, asset specificity, appropriability); and comparative efficiency of market, private, public and hybrid modes of governance. Secondly, we identify spectrum of market and private forms of governance of agro-ecosystem services (voluntary initiatives; market trade with eco-products and services; special contractual arrangements; collective actions; vertical integration), and evaluate their efficiency and potential. Next, we identify needs for public involvement in the governance of agro-ecosystem services, and assess comparative efficiency of alternative modes of public interventions (assistance, regulations, funding, taxing, provision, partnership, property right modernization).
Finally, we analyze structure and efficiency of governance of agro-ecosystems services in Zapadna Stara Planina – a mountainous region in North-West Bulgaria. Post-communist transition and EU integration has brought about significant changes in the state and governance of agro-ecosystems services. Newly evolved market, private and public governance has led to significant improvement of part of agro-ecosystems services introducing modern eco-standards and public support, enhancing environmental stewardship, desintensifying production, recovering landscape and traditional productions, diversifying quality, products, and services. At the same time, novel governance is associated with some new challenges such as unsustainable exploitation, lost biodiversity, land degradation, water and air contamination. What is more, implementation of EU common policies would have no desired impact on agro-ecosystem services unless special measures are taken to improve management of public programs, and extend public support to dominating small-scale and subsistence farms.
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TL;DR: In this article, the authors explore the implied two-way interaction between the magnitude of the opportunistic distortion and the margin of victory and show that opportunism pays off, leading to a larger win-margin for the incumbent.
Abstract: The literature on the rational political business cycle suggests that politicians systematically manipulate economic and fiscal conditions before elections to increase their chance of gaining reelection. Most tests of this theory look for evidence of preelection distortions in fiscal policy. We propose a new test that, instead, explores the implied two-way interaction between the magnitude of the opportunistic distortion and the margin of victory. The test is implemented using a panel of 278 Portuguese municipalities (from 1979 to 2005). The results show that (1) opportunism pays off, leading to a larger win-margin for the incumbent; (2) incumbents behave more opportunistically when their win-margin is small. These results are consistent with the theoretical model.
TL;DR: In this paper, the main incentive issues and the form of optimal contracts for Public Private Partnerships (PPPs) in transports are studied. But the authors do not consider how the risk of regulatory opportunism affects contract design and incentives.
Abstract: Building upon Iossa and Martimort (2008), we study the main incentive issues and the form of optimal contracts for Public Private Partnerships (PPPs) in transports. We present a basic model of procurement in a multitask environment in which a risk -averse firm chooses unobservable efforts in infrastructure and service quality. We begin by analyzing the effect on incentives and risk transfer of bundling building and operation into a single contract. We consider the factors that affect the optimal allocation of demand risk and their implications for the choice of contract length. We discuss the dynamics of PPP contracts and how the risk of regulatory opportunism affects contract design and incentives.
Journal Article•
TL;DR: A review of the literature on the relationship between the three major corporate governance mechanisms namely, board, disclosure and ownership and the firm performance can be found in this paper, where some studies found a positive relationship between board characteristics and firm performance, some report no relationship while, some other studies report a negative relationship between Board characteristics and firms' performance.
Abstract: IntroductionBerle and Means (1932) predicted the evolution of corporations with diffused ownership and control concentrated in the hands of the professional managers. The prediction came true but the separation of ownership and control brought certain problems along with it. The problem and the associated costs are well explained by Jensen and Meckling (1976), according to whom, the owners also called as principals, enter into a contract with the agents (i.e., managers) in order to engage them to run the organization on the behalf of the owners. As both, the agents and the principals are utility maximizers therefore, there are possibilities that the managers may not function in tune with the interests of the owners or shareholders. This problem with this contract is termed agency problem and the costs associated with this problem, agency costs. The agency problem has also been highlighted by Shleifer and Vishney (1997), according to whom, a manager borrows money from the financiers or from the shareholders to put them for productive use. The financiers, in order to ensure that their money is properly utilized, enter into a contract with the managers, because the contract cannot be a complete contract as the residual rights lie with the managers. These residual rights give them the discretion to act the way, they want to. It is therefore possible that they can act against the interests of the financiers. Therefore, it is essential to reduce the managerial opportunism to the maximum extent possible. Hart (1995), Shleifer and Vishney (1997) presented a few mechanisms, called as corporate governance mechanisms to curb or deal with agency problems and managerial opportunism. Research has suggested that corporate governance mechanism deals with the ways in which capital providers guarantee to firms of getting a return on their venture, (Shleifer and Vishney, 1997). They also propose that the corporate governance came into picture basically, for supporting and protecting the investors from the agents, that is, to reduce agency costs.Cadbury committee (1992) defines corporate governance as a system by which companies are directed and controlled. OECD (2004) defines it as a set of relations among a firm's management, its board, shareholders and stakeholders, which is one of the key elements that improves a firm's performance, and the fluctuation of capital markets, stimulating the innovative activity and development of enterprises.Dennis and McConnell (2003) also argue in their paper that, to overcome problems in corporate governance, different mechanisms can be applied. These mechanisms can be internal or external, where internal mechanisms operate through the board of directors, ownership structure (managerial ownership). Some of these mechanisms are: board of directors, ownership concentration and disclosure. However, whether these mechanisms actually serve the purpose of protecting the principles and creating value for them, needs to be researched. The value creation can be measured through the performance of the firm. In this paper, we review the literature on the relationship between the three major corporate governance mechanisms namely, board, disclosure and ownership and the firm performance.Board Characteristics and Firm PerformanceAccording to Perry and Shivdasani (2005), board of directors is one of the most important mechanisms used by the shareholders to monitor management. They state, "Charged with hiring, evaluating, compensating and ongoing monitoring of the management, the board of directors is the shareholder's primary mechanism for oversight of managers". As the board of directors is one of the most important mechanisms to check the erring management, several studies have been conducted to see how the characteristics of the board can control management and therefore enhance the performance of the firm. However, there is no consistent evidence regarding this relationship. Some studies found a positive relationship between board characteristics and firm performance, some report no relationship while, some other studies report a negative relationship between the board characteristics and firms' performance. …
30 Apr 2009
TL;DR: In this article, the authors take Hofstede's model of national culture as a point of departure and model the effects on trade processes of one of the five dimensions: power distance.
Abstract: Agent-based computational economics studies the nature of economic processes by means of artificial agents that simulate human behavior. Human behavior is known to be scripted by cultural background. The processes of trade partner selection and negotiation work out differently in different communities. Different communities have different norms regarding trust and opportunism. These differences are relevant for processes studied in economics, especially for international trade. This paper takes Hofstede's model of national culture as a point of departure. It models the effects on trade processes of one of the five dimensions: power distance. It formulates rules for the behavior of artificial trading agents and presents a preliminary verification of the rules in a multi-agent simulation.
TL;DR: The main findings are that Loyal (committed) customers and long-term relationships do not always generate better cash flows, especially when buyers either look for superior current value in each purchase opportunity or are short-term oriented.
Abstract: We present an analytic approach to address the problem of how sellers can establish and maintain a long-lasting relationship with a buyer and, at the same time, maximize customer lifetime value (CLV). To model the evolution of a relational exchange between a seller and a buyer, we extend a well-known mathematical model of “love dynamics.” The growth of each partner’s commitment to the relationship is a sum of negative and positive terms. The negative term describes each partner’s propensities for opportunism, while the positive terms describe each partner’s trust in the commitment of the other, and the reaction to marketing efforts. The seller controls the evolution of the relationship through social relationships and transactional marketing efforts. The main findings are as follows: (1) Loyal (committed) customers and long-term relationships do not always generate better cash flows, especially when buyers either look for superior current value in each purchase opportunity or are short-term oriented. (2) Without mutual trust between partners, the seller should treat old customers over time as new ones, making the reduction of retention costs impossible. (3) It is only cheaper to retain current customers rather than acquiring new ones if mutual trust between partners overcomes propensities for opportunism and the seller slightly discounts future cash flows.
TL;DR: The authors investigated the relationship between Machiavellianism and economic opportunism and found that opportunism is positively correlated with the ELOC Chance Factor and opportunism was negatively correlated with ELOC Internal Factor.
Abstract: Machiavellianism and economic opportunism are defecting strategies founded on manipulating information in order to maximize gain or power. This study investigated their relationship with economic internality. We hypothesized that individuals inclined to adopt defecting strategies would tend to have external economic locus of control (ELOC). A Greek sample of 175 participants completed the ELOC and Mach IV questionnaires and a scale of economic opportunism. Machiavellianism and opportunism were both positively correlated with the ELOC Chance factor. Opportunism was negatively correlated with the ELOC Internal factor. The findings confirmed the hypothesis and showed that this kind of defector overestimates the role of chance, uncertainty, and hazard as sources of economic reinforcements.
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TL;DR: In this article, the European Commission's Autumn forecasts are used to estimate reaction functions with four different information sets, ranging from budget plans to final outcomes, and deviations from plans during budget implementation.
Abstract: Drawing on the European Commission’s Autumn forecasts, I estimate fiscal reaction functions with four different information sets, ranging from budget plans to final outcomes. I also analyse deviations from plans during budget implementation. In a panel of 15 EU countries from 1987 to 2006, moving from plans to final data generally weakens the counter-cyclicality of budget balances and expenditures (though not of revenues), and reinforces electoral effects. Deviations from plans play a negligible role in the former finding, as they are often acyclical;but have a major role in the latter, as they display a clear opportunistic pattern.
Journal Article•
TL;DR: In this article, the authors investigated the role of agents' negotiation characteristics on opportunism and relationship continuance decisions in buyer-supplier relationships and found that agents' assertiveness and cooperativeness influence the tendency to continue in a buyer-Supplier relationship, after controlling for firm level factors including dependence and relational norms.
Abstract: Opportunism and relationship continuance are behaviors that express themselves in several different buyer-supplier contexts (Conner and Prahalad, 1996; Morgan et al., 2007; Morgan and Hunt, 1994). How firms manage supplier relationships (e.g., choosing and monitoring suppliers, developing and dissolving relationships) is increasingly critical to firms' operational efficiency, product development, profitability and long-term prosperity, and is becoming a strategic issue in today's business landscape (Chatain and Zemsky, 2007; Dwyer et al., 1987; Good and Evans, 2001; Lee et al., 2007; McIvor et al., 2006). Over the last decade and a half, there have been a number of studies investigating the phenomena of opportunism and relationship continuance (e.g., Heide and John, 1992; Noordewier et al., 1990), but the vast majority of them view the issue from the perspective of the firms, the buyer-supplier dyad (e.g., Morgan et al., 2007; Paulraj and Chen, 2005). To our knowledge, very little work has been done to investigate what role the actual decision-making agents play in influencing opportunism and relationship continuance decisions in the buyer-supplier contexts. These agents may engage in dynamic processes embedded in their exchange relationships such as information exchange and conflict resolutions. Therefore, the agents' behaviors in these processes could make or break the relationships between firms whom the agents represent. This study departs from the extant buyer-supplier relationship literature by empirically investigating the effects of agents' negotiation characteristics on opportunism and relationship continuance decisions in buyer-supplier relationships. The specific purpose of the study investigates the question, "How do agents' assertiveness and cooperativeness influence the opportunism and the tendency to continue in a buyer-supplier relationship, after controlling for firm-level factors including dependence and relational norms?" This article is structured as follows. The next section entails a survey of the literature and develops corresponding hypotheses, followed by a description of the experimental design and reporting of the results. The Discussion section contains both general and managerial implications based on our results, and the article concludes with the Limitations and Conclusion section. LITERATURE REVIEW AND HYPOTHESES Relational Norms and Dependence Relational norms may be described as the values shared among exchange partners regarding what is deemed appropriate behavior in a relationship (e.g., Heide and John, 1992).. When buyer-supplier relationships are characterized by high relational norms, exchange parties are more committed (Gundlach et al., 1995) and exhibit a long-term orientation (Ganesan, 1994), thus lowering future negotiation costs (Artz and Norman, 2002). Over the last two decades, closer supply chain relationships exhibited by high relational norms such as trust, collaboration, long-term relationship, and increased information-sharing have evolved in many industries to help firms respond to changes (Droge and Germain, 2000; Hoetker et al., 2007; Monczka et al., 1998; Sengun and Wasti, 2007; Whipple and Frankel, 2000). Relationships with low relational norms are characterized by distributive (Walton and McKersie, 1965) or aggressive (Ganesan, 1993) bargaining behaviors. The use of legal contracts governs these relationships, and aggressive bargaining tactics are used to resolve disagreements. In short, high relational norm relationships may be characterized as partnerial or cooperative, while low relational norm relationships tend to be "arm's length" or competitive. In the socio-economic literature, Hirschman (1970) and Helper and Sako (1995) use a continuum of firm relationship styles to explain differences between adversarial and partnerial firm relations. The adversarial form of buyer-supplier relationship is called an exit relationship since in the presence of relationship stressors, the tendency to exit the relationship agreement is high. …
01 Jan 2009
TL;DR: In this paper, the authors propose a new typology of hybrid governance mechanisms designed to alter the incidence of opportunism by counterparties or stakeholders to a series of interconnected transactions, and point the way toward research on a broader governance framework for such projects.
Abstract: Prior research on the governance of large infrastructure projects has emphasized the question of who should own and operate long-lived infrastructure assets, comparing public and private organizations with respect to productive efficiency or the distribution of welfare. Our ongoing research seeks to shift the focus of this research to the question of how public or private organizations can best manage two distinct kinds of governance challenges that occur systematically during the project shaping, implementation and operation phases of such projects: (1) opportunism in the presence of displaced agency – i.e., conflicts between the incentives of parties leading decision making in each of the successive and interdependent phases of design, construction and operations that lead to sub- optimal investment and may lead them to pursue their self-interest with guile; and (2) political and regulatory risk – i.e., ex post political interventions in operational decisions. A model that incorporates the efficiency and legitimacy consequences of governance decisions over the life of an infrastructure project thus offers substantial gains on more piecemeal disciplinary approaches. We seek to develop a new typology of hybrid governance mechanisms designed to alter the incidence of opportunism by counterparties or stakeholders to a series of interconnected transactions. This paper lays out the two key governance challenges of infrastructure projects in some detail, with examples of each, and points the way toward research on a broader governance framework for such projects. Our conference presentation and future publications will focus in greater depth on examples of both existing and proposed new hybrid governance arrangements that must be studied, refined and implemented to address these challenges.
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TL;DR: In this article, a new approach for analysis and improvement of governance of agro-ecosystem services is presented, taking into account the role of specific institutional environment (formal and informal rules, distribution of rights, systems of enforcement); and behavioral characteristics of individual agents (preferences, bounded rationality, opportunism, risk aversion, trust); and transactions costs associated with ecosystem services and their critical factors (uncertainty, frequency, asset specificity, appropriability); and comparative efficiency of market, private, public and hybrid modes of governance.
Abstract: In this paper we incorporate interdisciplinary New Institutional and Transaction Costs Economics (combining Economics, Organization, Law, Sociology, Behavioral and Political Sciences), and suggest a framework for analysis of mechanisms of governance of agro-ecosystem services. Firstly, we present a new approach for analysis and improvement of governance of agro-ecosystem services. It takes into account the role of specific institutional environment (formal and informal rules, distribution of rights, systems of enforcement); and behavioral characteristics of individual agents (preferences, bounded rationality, opportunism, risk aversion, trust); and transactions costs associated with ecosystem services and their critical factors (uncertainty, frequency, asset specificity, appropriability); and comparative efficiency of market, private, public and hybrid modes of governance. Secondly, we identify spectrum of market and private forms of governance of agro-ecosystem services (voluntary initiatives; market trade with eco-products and services; special contractual arrangements; collective actions; vertical integration), and evaluate their efficiency and potential. Next, we identify needs for public involvement in the governance of agro-ecosystem services, and assess comparative efficiency of alternative modes of public interventions (assistance, regulations, funding, taxing, provision, partnership, property right modernization). Finally, we analyze structure and efficiency of governance of agro-ecosystems services in Zapadna Stara Planina – a mountainous region in North-West Bulgaria. Post-communist transition and EU integration has brought about significant changes in the state and governance of agro-ecosystems services. Newly evolved market, private and public governance has led to significant improvement of part of agro-ecosystems services introducing modern eco-standards and public support, enhancing environmental stewardship, desintensifying production, recovering landscape and traditional productions, diversifying quality, products, and services. At the same time, novel governance is associated with some new challenges such as unsustainable exploitation, lost biodiversity, land degradation, water and air contamination. What is more, implementation of EU common policies would have no desired impact on agro-ecosystem services unless special measures are taken to improve management of public programs, and extend public support to dominating small-scale and subsistence farms.
TL;DR: This paper showed that outsourcing firms could also make use of brand equity to safeguard themselves from the threat of potential market entry by outsourcing suppliers when the outsourced component is a core competence, particularly when the rate of learning is at best moderate.
Abstract: Outsourcing has long been touted as an avenue for companies to divest their non-core processes for cost and efficiency gains. However, outsourcing has since become so sophisticated that some companies are even outsourcing core functions such as engineering, marketing, and R&D and as a consequence, could be unknowingly nurturing its outsourcing partners as future competitors. Through formal game theoretic analysis, we show that in addition to learning, outsourcing firms could also make use of brand equity to safeguard themselves from the threat of potential market entry by their outsourcing suppliers when the outsourced component is a core competence, particularly when the rate of learning is at best moderate. In addition, we show that it may be optimal for outsourcing firms to adopt a make-and-buy strategy.