Showing papers on "Opportunism published in 2013"

The interplay of drivers and deterrents of opportunism in buyer–supplier relationships

Abstract: Fostering and maintaining buyer–supplier relationships is a fundamental premise of many channel initiatives. Indeed, these relationships may culminate in significant performance enhancements and competitive advantage. Yet these relationships may also result in competitively harmful events such as partner opportunism. Despite this potential competitive erosion, there is a lack of studies examining the interplay between the drivers and deterrents of opportunism. By building on transaction cost economics and social capital theory, we examine, via a sample of 400 manufacturing firms in China, how the interplay between drivers (relationship-specific investments and behavioral uncertainty) and deterrents (inter-firm social capital) of opportunism affect partner opportunism in buyer–supplier exchanges. The significance of this interplay between the drivers and deterrents sheds new light on how a firm can leverage social capital to curb the harmful effects of opportunism.

Social Intermediation in Base-of-the-Pyramid Markets

Abstract: Our study explores the structuring decisions made by intermediaries seeking to alleviate poverty by connecting base-of-the-pyramid markets with more developed markets. Using intermediation theory to ground our study, we collected qualitative data on 29 social intermediation projects located within Latin America, Africa, and Asia. Our findings suggest that �socializing� intermediation theory to more accurately explain and predict structural outcomes across more diverse contexts requires three key modifications: (1) the attenuation of opportunism, which creates an internalizing social force; (2) the accommodation of non-monetary objectives, which creates an externalizing social force; and (3) the perception of transaction capabilities as tractable, which serves as a guidepost for reconciling these two opposing social forces.

Passive and Active Opportunism in Interorganizational Exchange.

Abstract: This article examines how firms in interorganizational relationships respond differently to active and passive opportunism and observes how these opportunism forms erode satisfaction with the performance of these relationships. The multimethod approach of two experiments and one longitudinal field study demonstrate that firms tolerate more passive opportunism than active opportunism (Study 1) and that transaction costs play a mediating role between opportunism form and satisfaction with performance of the relationship (Study 2). Finally, the field study reveals that, over time, passive opportunism has a more corrosive impact on satisfaction with performance than active opportunism (Study 3). Together, the findings underscore the importance of distinguishing passive and active opportunism and the need to develop a better understanding of its management and consequences.

Inter-firm opportunism: a meta-analytic review and assessment of its antecedents and effect on performance

Abstract: Purpose – This meta-analysis aims to aggregate empirical findings from extant inter-firm opportunism literature. Design/methodology/approach – First, a quantitative summary on the bivariate relationships between the antecedents and the consequences of opportunism is offered. Second, a multivariate analysis is employed to identify significant antecedents of opportunism and the process variables that mediate the relationship between inter-firm opportunism and organizational performance. Findings – Results reveal that goal congruence has the largest influence on inter-firm opportunism, followed by cultural sensitivity, communication, and environmental volatility, norms, governance emphasis, and relative dependence. These important antecedents represent significant research directions for inter-firm opportunism. In addition, inter-firm opportunism affects organizational performance through a mediating process including commitment, functional conflict, overall satisfaction, and trust. Commitment is found to ac...

Low-Stakes Opportunism

Abstract: In this research, the authors develop a theory addressing why people act opportunistically when the stakes (i.e., payoffs) are low. Transaction cost theory suggests that opportunistic behavior is more likely under high-stakes conditions. The authors identify rapport as an important moderator of this relationship. Through a series of three studies, they find that high-stakes opportunism appears to occur only when rapport is low. In contrast, when rapport is high, this relationship reverses, such that opportunism is actually more likely when the stakes are low than when they are high. The authors attribute these findings to differences in reasoning and find that when rapport is high and the stakes are low, people are better able to justify their actions by employing morally malleable reasoning. Thus, this research offers insights into an important form of opportunism that has been largely absent from transaction cost theory.

Learning in the European Union: theoretical lenses and meta-theory

Abstract: The European Union may well be a learning organization, yet there is still confusion about the nature of learning, its causal structure and the normative implications. In this contribution we select four perspectives that address complexity, governance, the agency–structure nexus, and how learning occurs or may be blocked by institutional features. They are transactional theory, purposeful opportunism, experimental governance and the joint decision trap. We use the four cases to investigate how history and disciplinary traditions inform theory; the core causal arguments about learning; the normative implications of the analysis; the types of learning that are theoretically predicted; the meta-theoretical aspects and the lessons for better theories of the policy process and political scientists more generally.

Transaction cost regulation

Abstract: This paper discusses the fundamental underpinnings and some implications of transaction cost regulation (TCR), a framework to analyze the interaction between governments and investors fundamentally, but not exclusively, in utility industries. TCR sees regulation as the governance structure of these interactions, and thus, as in standard transaction cost economics, it places emphasis in understanding the nature of the hazards inherent to these interactions. The emphasis on transactional hazards requires a microanalytical perspective, where performance assessment is undertaken within the realm of possible institutional alternative. In that sense, politics becomes fundamental to understanding regulation as the governance of public/private interactions. The paper discusses two fundamental hazards and their organizational implications: governmental and third party opportunism. Both interact to make regulatory processes and outcomes more rigid, formalistic, and prone to conflict than envisioned by relational contracting.

How) do devices matter in finance

Abstract: This article distinguishes between different concepts of device. In traditional English usage, as in the Foucauldian or Deleuzian concept, devices exist in a context of power, opportunism and force. Through argument and evidence about hedge funds and financial innovation, we argue that this kind of non-Callonian device is ubiquitous in finance so that the idea of device can be part of a much more political analysis of the present-day capitalism. Capitalist devices are not neutral tools with fixed uses and predictable results because they vary in purpose and effects from one context to another. This is the point Deleuze makes in the context of nomadic war machine when he explains how a tool can be a weapon; and it is an issue in the present-day capitalism where we can ask whether politically strong financial elite have turned tools like short-selling into weapons that may harm other stakeholders in the economy. This article also connects devices in finance and the process of innovation with the desires of ...

The Quality of Domestic Legal Institutions and Export Performance: Theory and Evidence from China

Abstract: Does the quality of domestic legal institutions matter for export performance? How does differential access to protections and privileges offered by informal institutions moderate the relationship between the quality of formal legal institutions and export performance? To answer these questions, we develop a theoretical framework drawing on insights from trade theory and institutional theory. We propose that higher-quality legal systems in an exporter’s location are associated with higher export performance, particularly when trade partners face higher levels of external and internal uncertainty. We further propose that firms that have less access to local informal institutions to reduce transaction costs and opportunism benefit more from better-developed legal institutions. Using information for more than 198,000 firms and legal quality information for 120 cities in China, we find strong support for our predictions. We discuss our contributions to the literature on institutions and export.

Agency Theory in Explaining Islamic Financial Contracts

Abstract: In this paper, we explore the concept of agency theory in a conventional perspective, to understand the types of agency problems emerging in the contractual relationship context. However, many agency contracts that have been observed are incomplete. Completeness in the contractual agency relationship contributes to th e reduction of the monitoring cost of contracting parties and there is a scarcity of literature which has fueled the effort to discuss agency relationship in Islamic financial contracts and agency problems. For such contract to succeed, the paper provides an initial baseline to understand how Tawhid epistemology elements can be used to facilitate and deter different goals, different levels of information, also the opportunism behavior in Islamic financial contracts.

Toward understanding passive opportunism in dedicated channel relationships

Abstract: The investments made in an interfirm relationship have implications for the effectiveness of an agreement. In this study, we investigate whether these investments influence the level of passive opportunism observed in a relationship. Whereas transaction cost theory suggests that firms that make idiosyncratic investments are reluctant to engage in opportunism, reactance theory offers logic suggesting that such investments may increase the likelihood of opportunism. In addition, we investigate whether perceived justice influences the effect of investments on levels of passive opportunism. Data from 120 retail managers in the Norwegian consumer electronics industry support reactance theory predictions and indicate that interactional justice moderates the relationship between specific assets and passive opportunism. We conclude with a discussion of the implications for theory and research.

An Entrepreneurial Perspective on Value Creation in Public-Private Ventures

Abstract: The authors discuss value creation in public-private business ventures, commenting on the article "Creating and Capturing Value in Public-Private Ties: A Private Actor's Perspective," by I. Kivleniece and B. V. Quelin, published elsewhere in the issue. According to the authors, behavioral docility in management can facilitate intersubjective interaction and overcome threats of stakeholder activism and opportunism through the generation of trust and its associated competitive advantages.

Epistemic Institutions and Epistemic Cooperation in International Environmental Governance

Abstract: Much recent scholarship in international law on the relationship between science and policy argues that the expert bodies that generate policy-relevant scientific advice (“epistemic institutions”) should be autonomous from the institutions which use that advice as an input to make international legal rules (“legal institutions”). In this article, I argue that legal institutions’ acquisition of policy-relevant scientific advice is akin to the make-or-buy decision faced by firms: legal institutions can either acquire such advice from independent epistemic institutions or they can seek such advice from an internal and hierarchically subordinate epistemic institution. I then apply the theory of the firm to show that the conventional wisdom about the benefits of scientific autonomy is incorrect.Scientific advice must be credible in the eyes of non-expert regulators in order to support the widespread adoption of legal rules to address transnational environmental problems. Where states individually lack the incentive to regulate an environmental problem absent a collective decision, states that lack the capacity to directly assess the credibility of the scientific record may block the adoption of legal rules in international institutions out of fear that the scientific assessment process is biased to produce particular policy outcomes. Hierarchical control of epistemic institution can overcome this problem by giving such states direct oversight of the scientific assessment process, thereby reassuring them of the credibility of the scientific record.By contrast, where states internalize a sufficient amount of the benefit from regulating an international problem unilaterally, fragmenting legal and epistemic institutions is optimal. Where a collective decision is not necessary to coordinate state behavior, the decentralized adoption of policy-relevant scientific recommendations signals to scientifically-disadvantaged states that the scientific record is credible, thereby eliminating the need for hierarchical controls to perform the same function. Fragmentation is thus the ideal mode of organization because it best facilities the development and diffusion of policy-relevant science. This framework explains much of the variation we observe in the independence of international scientific bodies from legal institutions. Legal institutions governing commons issues, such as the International Whaling Commission or a variety of fisheries regimes, have integrated scientific bodies to deal with the opportunism issues created by the need for collective decision-making. By contrast, organizations such as the International Renewable Energy Agency – an independent epistemic institution that produces and disseminates information about renewable energy technologies and their economic viability – do not create the same kinds of opportunism issues because states have an incentive to act individually on the basis of the epistemic institution’s recommendations. More generally, the application of new institutional economics to explain vertical integration decisions within international institutions opens a field of inquiry that might be expanded to explain a variety of regime design puzzles in international law, such as for example the variation in the extent to which international legal institutions create institution-specific courts (such as the International Tribunal for the Law of the Sea) or outsource disputes to standing bodies (such as the International Court of Justice).

Designing contracts for complex services

Abstract: In this article, we employ transaction cost economics and the contingency stream of organization theory to answer two related questions. First, when contracting for complex services, do governments design contracts for flexibility? Second, is the contingency perspective relevant to understanding contract design? Examining 130 professional service contracts awarded by state government agencies in the USA, we find that task complexity and task unpredictability, two dimensions of task uncertainty, increase the probability of flexible governance. This research highlights for managers the important fact that the potential for opportunism and task complexity are different sources of uncertainty that pose different challenges and call for different governance solutions. The study enriches our understanding of transaction costs by probing the conditions under which task uncertainty matters most (and least), and further shows the utility of integrating transaction cost economics with contingency theory to better understand contract governance.

The Impact of Transaction Attributes and Trust on Ex-Post Opportunism

Abstract: The aim of this study is to examine the impact of transaction cost variables (environmental uncertainty and transaction-specific investments) as well as trust as a relational safeguard mechanism on ex-post opportunistic behaviors in the relationships between tour operators and hotels. The data were collected from a field survey in the Turkish tourism industry. The data provide strong support for the transaction cost hypotheses and the role of trust on ex-post opportunism. The findings show that higher investments of hoteliers in transaction-specific assets are associated with increased risk of opportunism by the tour operators. Similarly, this study indicates that opportunistic actions increase with the unpredictability of environmental conditions. Furthermore the direct and indirect effects of trust are confirmed by the data. When trust moderates the influence of transaction cost variables it is observed that the positive effects of environmental uncertainty and transaction-specific investments are lower. Consequently, this study contributes to the literature by providing an opportunity to discuss both the direct effect and indirect effects of trust on ex-post opportunism.

When Relationship Marketing Goes Wrong: Opportunism and Consumer Well-Being in Consumer-Bank Relationships

Abstract: This article revisits debates surrounding the ethics of relationship marketing in the context of bank–consumer relationships in Egypt. The argument develops the conceptual lens of opportunism, observing that an insight into opportunistic behaviour can help to understand why, when implemented, relationship marketing may often play out in unintended (and often unethical) ways. The article describes an interpretive analysis of 25 interviews with Egyptian bank consumers. Two overlapping sets of opportunistic behaviours emerge as potentially unethical: offering differing levels of service to consumers according to their profitability and exploiting the knowledge asymmetry between the consumer and the bank through complex agreements. A third theme that cuts across these behaviours is the dominance of a performance-driven culture in banks, which means that sales targets and other performance measures are often prioritised by staff over consumer needs and well-being. In closing, the article explores possible mech...

Ownership and trust in the governance structures of Spanish-Moroccan SMEs constituted as international joint ventures

Abstract: The choice of a specific governance structure can be related to different aspects. This structure can be critical in the success of a firm. In SMEs constituted as international joint ventures (IJVs) the governance structure may depend on different elements to large firms and they should be described. The relationship between partners can be decisive in determining these structures. So, the ownership, the participation of partners in different levels of governance, and trust are key factors in determining the choice of the governance structure. The results, from 210 SMEs constituted as Spanish-Moroccan IJVs, reveal the importance of the ownership concentration and the overlapping of roles in the choice of governance structures. Control and trust are important issues. The existence of a board or a sole administrator allows aligning the interest of partners and managers, limiting the possible situations of opportunism by managers. The existence of owner-managers in Spanish-Moroccan IJVs is positively related with the existence of a board, possibly because there is no convergence of interests between partners. The results show that trust and the control exercised via the governance structure are substitutive mechanisms.

Overcoming Opportunism in Public‐Private Project Finance

Abstract: Opportunism, either governmental or private, is a powerful deterrent against public-private project financing, especially when considering the scale of the investment in infrastructure. The parties can, however, secure themselves against opportunism of the counter-party by exchanging an exit (put) option for the private investor and a bail-out (call) option for the public agent on the private investor’s shares. These over-the-counter options combine the stability of long-term contracts and the flexibility of short-term contracts. The exit/bail-out option mechanism reduces entry barriers by streamlining incomplete long-term contracts and avoiding contractual problems related to bounded rationality and opportunism.

Suppliers' capability factors affecting manufacturer commitment, opportunism, and supplier performance

Abstract: This study extends the research on the capabilities–dependence–outcomes model in manufacturer–supplier relationships. Specifically, it examines the role of benefit-based and cost-based dependence in connecting relationships between supplier capabilities and manufacturer commitment. It also examines the impact of manufacturer commitment on supplier sales performance and manufacturer opportunism. Data from a survey of 131 suppliers of three leading Korean manufacturers are used to test the model of this research. A key finding is that suppliers should strive to generate benefit-based manufacturer dependence. Our results also indicate that supplier commitment in transaction-specific investments begets manufacturer commitment.

Transaction Estimation of Institutions

Abstract: The paper represents the fundamental principles and ideas of the transaction theory of economic institutions, which supposes quantification of the quality of institutions through evaluation of economic transactions. The major works of the founders as well as the practical pathways of implementing the theory are discussed. The paper consolidates the author's main contributions to the study of companies' transactions based on their market potential, the technique of institutional atlas design, institutional effects of the staff opportunism decrease, assessment of the transaction costs of hybrid organizations, and the formal representation of the company's external transaction function.

A Safety Valve Model of Equity as Anti-Opportunism

Abstract: In this paper, we argue that the notion of equity as a safety valve on the law can be seen as part of the law’s response to the problem of opportunism. We define equity as the use of a more flexible, morally judgmental, and subjective mode of legal decision making that roughly corresponds with historical equity. We distinguish opportunists as agents who have unusual willingness and ability to take advantage of necessary imperfections in the law. We present a simple contracting model that captures the role of equity as a safety valve, and show how it can solve problems posed by opportunists. In our model, a simple but imperfect formal legal regime is able to achieve first best in the absence of opportunists. But when opportunists are added, a more flexible regime (equity) – specifically, one that denies damages to parties who exploit contractual gaps – can be preferred. However, equity is also vulnerable to being used opportunistically by the parties it intends to protect. For this reason, we show that it is often preferable to limit equity, reserving it for use only against those who appear sufficiently likely to be opportunists. Our model generates intuitive comparative statics that describe the optimal expansiveness or restrictiveness of equity.

Design of contracts between knowledge-intensive service firms in comparative property right settings

Abstract: Purpose – This article aims to explore how knowledge-intensive service firms design inter-firm contracts to govern the exchange of highly intangible and inseparable knowledge under varying degrees of property right protection. Design/methodology/approach – This research uses a multiple case study of management consulting firms domiciled in Serbia and Albania. Findings – Firms domiciled in relatively weak property right settings prefer more informal contracts, whereas those in settings of superior property right protection favour greater formality as a means of encouraging the creation and sharing of knowledge, whilst concurrently mitigating the threat of opportunism. Research limitations/implications – This article contributes new knowledge with regard to the design of inter-firm contracts to govern the sharing of highly intangible and inseparable knowledge. In terms of theory, it employs a transaction cost economics approach in which inter-firm contracts are decomposed into five requisite provisions, whi...

Coordination mechanisms for quality improvement and market access in Ethiopian potato value chains

Abstract: Market access for smallholders in developing countries often requires the improvement of product quality. As products are traded in value chains, quality improvement entails the coordination of activities and decisions by all actors in the chain. Thus, enhancing smallholders’ commercialization requires, for instance, making significant investment in production technologies, availing market oriented varieties, and establishing well-functioning input and output markets. Markets are one form of institutions providing coordination functions. From the perspective of new institutional economics (NIE), there are also other types of institutions (e.g., contract farming, producer organizations, etc.) facilitating economic exchange, This thesis aims to gain insights into the factors affecting smallholders to improve quality and market access by analyzing their relationship with upstream and downstream actors and generateinformation relevant for the development of sustainable value chains in the potato sector. The thesis has demonstrated that farmers’ assessment of production- and market-related attributes of local potato varieties strongly influence their decision to adopt improved varieties (IVs). Thus, enhancing the uptake of IVs requires development of varieties with market-related quality attributes, adequate information exchanges, and joint (or delegated) decision-making. Regarding smallholders’ downstream relationship, most transactions are carried out at farmgate. This type of arrangement has provided a better opportunity for buyers to closely monitor quality and for smallholders to minimize the risk of opportunism in the spot market. In farmer-buyer relationships, coordination is largely enforced through reputation effects and repeated interactions. Although farmgate and trust-based contractual relationships can provide better incentives to improve quality, smallholder commercialization in highly ruminative markers, such as the regional market, needs more integrated type of coordination, such as contract farming arrangement.To this effect, the thesis provides an analytical framework to analyse contractual relations in a contract farming scheme by conceptualizing smallholders’ preferences as a multi-category discrete choice problem, where the choice of a contract is modelled as a set of different contract design attributes. Smallholders’ preferences for specific contract design attributes can largely be explained from the perspective of smallholders’ risk aversion behaviour and entrepreneurship traits. The findings showed that smallholders’ willingness to participate in a contract farming scheme increases if the contractual relationship is based on a written form; inputs, technical assistance, and seed supplied by the buyer firm; and variable output quality and variable price specifications. While the uncertainty in the input market motivates farmers for participation, the risk of underpayment (when accepting a fixed-price contract) and the lack of freedom to make autonomous decisions in the output market tend to refrain them from participation. In this regard, the thesis has provided an argument about the significance of institutional support (for instance, supplying the necessary inputs through farmer organizations) and flexible contracts to ease the tension and thus to stimulate smallholders to participate in contract farming.