Showing papers on "Opportunism published in 2020"

Transaction cost theory: past, present and future

Abstract: Transaction cost theory emerged over 80 years ago yet still continues to exert an important influence on marketing thought. In this article, I examine the past, present and future of this important theory by exploring the work of three of its key scholars: Ronald Coase, Oliver Williamson and Yochai Benkler. This examination provides an overview of each scholar’s ideas, a look at their intellectual influences, and an assessment of their impact on marketing scholarship. In addition to this in-depth exploration of transaction cost theory, I also highlight the contextual nature of how theories form, develop and change over time. My hope is that this examination will enrich our understanding of this important theory and suggest how it can be applied to a new set of marketing topics.

The Trust Triangle: Laws, Reputation, and Culture in Empirical Finance Research

Abstract: We propose a construct, the Trust Triangle, that highlights three primary mechanisms that provide ex post accountability for opportunistic behavior and motivate ex ante trust in economic relationships. The mechanisms are (i) a society’s legal and regulatory framework, (ii) market-based discipline and reputational capital, and (iii) culture, including individual ethics and social norms. The Trust Triangle provides a framework to conceptualize the relationships between trust, corporate accountability, legal liability, reputation, and culture. We use the Trust Triangle to summarize recent developments in the empirical finance literature that examine how trust is formed and how trust, or its absence, affects financial markets, firm performance, and the incidence of financial fraud. To date, most studies examine only one leg of the Trust Triangle in isolation. The evidence, however, indicates that all three legs of the Trust Triangle have first-order effects on a wide range of financial outcomes and that they are interrelated. Attempts to model trust and trustworthiness that do not incorporate all three aspects of the Trust Triangle will therefore miss essential aspects of the basic economic problem of how counterparties overcome the risks of moral hazard, asymmetric information, and opportunism to engage in mutually beneficial exchange and production activities. We focus especially on culture-related mechanisms, a recently developed area in empirical finance research that has potential to influence the more established research on laws and reputation.

Reinvigorating the study of opportunism in supply chain management

Abstract: Opportunism is a core issue in supply chain management. However, assumption‐omitted testing and a focus on general opportunism as opposed to specific forms of opportunism have stubbornly limited our understanding of this construct. Grounded in a review of empirical studies of opportunism, we identify empirical challenges that perpetuate conceptual limitations in the study of opportunism in supply chains. Hence, we provide suggestions about research designs and data sources that support an agenda that steers research to refine and develop the theory about opportunism. Our call for a reinvigoration of the study of opportunism supports rigor – by discussing research design and data sources – and relevance – by identifying topics for future supply chain research.

Related party transactions and firm value: The moderating role of corporate social responsibility reporting

Abstract: This study investigates the influence of related party transactions (RPTs) on firm value. Further, it examines whether a firm’s corporate social responsibility (CSR) reporting reflects its corporate values and ethical concerns, therefore mitigating the value-destroying effects of RPTs. Based on 274 observations from publicly listed firms in Indonesia, our results show that RPTs (i.e., related party sales) are negatively related to firm value. Further, we find that in the presence of better CSR reporting, the relationship between RPTs and firm value becomes more positive. This is in line with the view that CSR reporting, which reflects firms’ ethical concerns, may serve as a mechanism against managers’ opportunism. However, we find that related party payables have a positive relationship with firm value. Further investigation reveals that, although certain RPTs show a short-term, value-enhancing effect, these transactions seem to result in subsequent tunneling activities, suggesting managerial opportunism in the long term.

Labor opportunism as a blocking factor for the innovative development of industrial enterprises

Abstract: The innovative way of enterprise development depends on many issues in the framework of legislation, financing, infrastructure, human resources, technological base, information, and other areas. The current study analyzes the factors that determine the manifestations of labor opportunism and its forms based on functional and resource approaches, taking into account institutional and economic constraints among workers in the energy industry. The results of a sociological study on the forms of opportunistic behavior at the enterprises of the energy industry are presented. The results of the study indicate that labor opportunism is one of the significant factors that block the innovative development of an enterprise. It has a major impact on labor relations as long as one of the conditions for the emergence of opportunism is a conflict of interests between the employee and the employer. It occurs when the interests of one economic agent run counter to the interests of another. This is proved by the results of assessing the influence of various factors on the opportunism level of employees of energy enterprises and is based on correlation and regression analysis. In the framework of this study, labor opportunism is understood as a form of selfish behavior of an employee pursuing personal gain as a response to a conflict of interests between economic agents in the course of labor activity. The conclusions reached suggest that labor opportunism should be considered as a blocking factor when designing the innovative development of an industrial enterprise. Measures aimed at overcoming labor opportunism, building trust in the team and raising the level of innovation in enterprises are proposed.

Opportunism is in the Eye of the Beholder: Antecedents of Subjective Opportunism Judgments

Abstract: Contractualist work in business ethics as well as in economic organization theory views opportunistic behaviors as problematic since they create economic harm and are often considered to violate ethical norms. Yet, much of the empirical literature on opportunism has adopted a rather simplistic definition of opportunistic behaviors as behaviors that violate formal and/or relational contracts and assumed that instances of opportunism can be unequivocally defined by simply referring to the content of contracts. The consequence of this assumption has been a disregard for factors other than the content of contracts that may influence whether exchange partners judge an unexpected behavior they face during exchange relationships as opportunistic or not. The present investigation explores the factors that shape exchange partners’ subjective opportunism judgments through two vignette-based laboratory experiments. Results from the first experiment, where subjects were asked to take the perspective of a harmed party, show that opportunism judgments are influenced by the type of the behavior, type of the causal account provided for the behavior, perceived type of the exchange, and personality traits of the actor making the judgment. The second experiment, in which subjects were asked to take the perspective of the transgressor, demonstrates the influence of perspective. In particular, victims are more likely to assess a given unexpected behavior as opportunistic than transgressors, and their judgments do not relate to the underlying factors in the same way as the victims’ judgments. I discuss implications in terms of the governance of interfirm exchange relationships.

The effect of contract completeness on knowledge leakages in collaborative construction projects: a moderated mediation study

Abstract: Organizational networking has been acclaimed as a useful tool for knowledge transfer. However, the demerit associated with knowledge transfer is the leakage of commercially valuable information/knowledge. The purpose of this paper is to empirically establish a useful framework for helping collaborative projects reduce potential knowledge leakages.,The study applies a hybrid methodology to collect data. Postulates are tested through SPSS 23 and Process Macro 3.0 model 7.,The study finds that knowledge leakage is negatively influenced by contract completeness. Contract completeness has a positive effect on trust and a negative effect on distrust. Partner’s learning intent moderates the relationship of contract completeness with trust and distrust. Trust and distrust negatively mediate the relationship between contract completeness and knowledge leakage.,The study contributes to the theories of information processing and knowledge management by empirically stating how contract completeness, an organizational structure, supports knowledge management under the influence of partner’s opportunism. The study sees positivism in distrust and explains how practitioners maintain an observatory eye on partner’s opportunism by virtue of distrust ultimately adding value to the distrust literature.,The conceptual framework is novel because this is the first attempt to investigate the moderation effect of partner’s opportunism on the relationship of contract completeness and relational factors; and the mediation effects of trust and distrust between contract completeness and knowledge leakage.

The Conflicted Role of Purchasing in New Product Development Costing

Abstract: As organizations are increasingly challenged to find new sources of profit improvement, cost reduction becomes a top priority on the business agenda. Expectations for cost reductions are ongoing and influence both new and existing products and services. The costs for new product and service introductions are managed differently than ongoing cost reductions. Purchasing plays a central role, with different goals, in cost control for new products and services versus ongoing cost savings. This research uses a case study methodology to understand the conflict purchasing faces in managing both new product costs and ongoing cost reductions. Due to goal incongruence between new product development and ongoing savings initiatives, purchasing may act in its own best interest, rather than in the best interest of the organization or team. This is both a contracting and an information uncertainty problem, creating an opening for passive opportunism by purchasing. Thus, agency theory and information processing theory (IPT) are combined to examine how information uncertainty can be reduced and contractual goal alignment improved in these situations. The outcome of this research is to expose potential goal misalignment between new product development cost processes and ongoing cost savings, and suggest theoretically grounded methods for reducing the potential conflict.

On a Stakeholder Model of Corporate Governance

Abstract: Rationales for a stakeholder model of corporate governance are based on enlightened self-interest, moral imperative, and/or externalities. Of these, the externalities rationale holds the most promise to justify a stakeholder focus. Recent evidence, however, indicates that the benefits of a stakeholder focus are limited because the social costs of many corporate activities already are internalized. Potential benefits also must be weighed against the costs, which include increased potential for conflict, waste, and managerial self-dealing. I conclude by advocating for the traditional governance model based on shareholder interests, with allowance for managers to deviate from this model in limited circumstances when the external impacts on other stakeholders are large. To constrain managerial opportunism, such deviations should be defended with a new type of double bottom line reporting, which augments traditional financial reporting with a statement of the social benefits of any deviations from shareholder value maximization.

Dark side of joint R&D collaborations: dependence asymmetry and opportunism

Abstract: The purpose of this study is to enhance the comprehensive understanding of the roles of resource investments, explicit contracts and three components of guanxi (i.e. renqing, ganqing and mianzi) in asymmetric research and development (R&D) partnerships. Treating dependence asymmetry as a multidimensional construct, this study examines the moderating effects of these elements on the relationships between resources and information asymmetry and opportunism.,The study was executed by issuing questionnaires to R&D managers participating in R&D projects and collaborations in the Shanghai and Jiangsu provinces via e-mail and face to face surveys. A multiple regression analysis was used to test the hypotheses.,The empirical test generally supported the conceptual model and produced the following findings: first, resources and information asymmetry significantly and positively affect opportunism. Second, the partner’s resource investments can weaken the effect of resources and information asymmetry on the partner’s opportunism. Third, explicit contracts can reduce the impact of information asymmetry on the partner’s opportunism. Fourth, renqing and ganqing but not mianzi can weaken the influence of information asymmetry on the partner’s opportunism.,This study provides a comprehensive and clear understanding of how opportunism can be curbed by jointly considering resource investments, explicit contracts and guanxi in asymmetric R&D cooperative relationships. Moreover, dependence asymmetry and guanxi are measured as a multidimensional construct and reveal their underlying structure, which expands previous understandings of risk management in R&D collaborations.

The influence of unilateral supplier transaction-specific investments on international buyer opportunism: empirical findings from local suppliers in China

Abstract: This study examines how unilateral supplier transaction-specific investments (TSIs), directly and indirectly, influence international buyer opportunism and the extent to which detailed contracts enable suppliers to safeguard against international buyer opportunism. The study also examines whether relationship length affects the efficacy of detailed contracts in cross-border outsourcing relationships.,The hypotheses are tested by using data collected from multiple informants working for 229 manufacturing suppliers in China. Multiple regression with a three-way interaction is used to test the hypotheses.,Unilateral supplier TSIs encourage international buyer opportunism through increased supplier dependence. Contract specificity negatively moderates the effect of supplier dependence on international buyer opportunism. This moderating effect is stronger in long-term cross-border buyer–supplier relationships than in short-term ones.,The current study extends the cross-border outsourcing literature by examining how emerging-market suppliers in a weak power position can proactively safeguard against international buyer opportunism by using detailed contracts. Our findings show that supplier dependence mediates the relationship between unilateral supplier TSIs and international buyer opportunism; detailed contracts, however, can help dependent suppliers safeguard against international buyer opportunism. In particular, the findings highlight the importance of long-term buyer–supplier relationships that enhance the efficacy of detailed contracts.

The Role of Psychic Distance in Entry Mode Decisions: Magnifying the Threat of Opportunism or Increasing the Need for Local Knowledge?

Abstract: Research Summary: With respect to entry mode decisions, psychic distance may play two contradictory roles. On one hand, the transaction cost perspective is concerned with opportunism. Psychic distance magnifies the threat of opportunism, which encourages higher levels of control by foreign firms. Conversely, the new internalization perspective emphasizes the role of complementary assets controlled by local entities. Distance increases the need to access local knowledge, which encourages firms to seek joint ventures. By adopting an experimental approach and measuring managers' a priori perceptions of distance, this article contributes to the literature by providing a more sophisticated approach for discriminating between these effects. The results indicate that distance magnifies the need for firms to access complementary assets; however, distance does not appear to magnify the threat of opportunism. Managerial Summary: This article explores the role that psychic distance (i.e., differences across countries in culture, language, religion, etc.) plays in how firms enter foreign markets. Specifically, do they prefer wholly owned subsidiaries (WOS) or do they prefer to form joint ventures (JV) with local players? One perspective argues that firms are concerned about potential partners in a foreign market taking advantage of them; thus, they will prefer the greater control a WOS offers. Conversely, firms may simply recognize that these differences put them at a disadvantage and prefer a JV as a way to gain local knowledge. Our experiments indicate that the latter explanation dominates. When entering very different countries, managers seem to prefer JVs in order to access key local knowledge.

Transformation of the Transaction Cost and the Agency Cost in an Organization and the Applicability of Blockchain—A Case Study of Peer-to-Peer Insurance

Abstract: Blockchain supports a variety of decentralized applications enabled by its immutable, decentralized, and trustless properties. However, there are no unifying criteria for blockchain architecture across the organizations and business models. This variance has created complex and diverse blockchain products. Costs in every economic exchange with partners are associated with two metrics: transaction costs due to market imperfections and agency costs due to conflict of interest and information asymmetry in an organization. To understand the effectiveness of economic activities by blockchain intervention and facilitate strategic alignment, we use transaction cost and agency cost as theoretical lenses to explore the impacts of blockchain, discuss the transformation of those costs, and support our arguments using a case study. Our study proposes that blockchain technology brings two more benefits, trust and transparency, to the existing Internet-based business services, and helps improve corporate governance. Smart contracts improve the execution time of transactions significantly and increase transaction volume rapidly. As the internet shifts hierarchies towards electronic markets, lack of trust between peers inhibits exchanges. Blockchain applications provide a framework for building trust between peers through its consent mechanism, which allows organizations to construct trust and operate in a more decentralized manner. Thus, by including blockchain in the current Internet infrastructure, the decision boundary of organization forms would extend outward. Finally, the transformation of costs in different stages of the blockchain transition, as described in our study, has important managerial implications for the organization structure and the role of third parties. Blockchain does not assume away transaction and agency costs but pushes the transformation of the two, forming a more efficient economic entity. This study contributes to the academia and the industry. We first add to the understanding of blockchain from the perspective of exchange technology. Second, we contribute to the prediction of organization boundaries. Third, the shift in the role of third parties supports the transaction cost theory in terms of controlling opportunism. Lastly, this study facilitates the development of blockchain business models and contributes to the practice.

Calculative Trust and Interfirm Contracts

Abstract: Interfirm contracts are plagued by opportunism arising from exchange hazards that increase the seller’s gains from holdup in fixed price contracts. These exchange hazards are higher when the seller...

The moderating effect of virtual integration on intergenerational governance and relationship performance in international customer–supplier relationships

Abstract: With the growing trend of digital technology in global supply chains, how to manage global supply chain relationships under digital transformation becomes a critical issue. However, academic research in this area is sparse. This study develops and tests a theoretical framework of the moderating effect of virtual integration on interorganziational governance in international customer supplier relationships.,We chose to examine the specific cross-border relationships between Taiwanese suppliers and their international OEMs because Taiwanese suppliers tend to be smaller than their international OEM customers, and thus their relationships usually show power asymmetry. Furthermore, the Taiwanese electronics industry offers a valuable empirical context because its industry members have served as pioneers in information technology development, have championed cross-border relationships with US and European industry leaders and are actively participating in the world economy,Our empirical findings indicate that virtual integration will strengthen the effect contractual governance on relationship performance. However, the moderating effect of virtual integration on relational governance is not significant. The paper discusses the theoretical and managerial implications in the end.,This study contributes to interorganizational governance literature in international contexts. Previous work on international relationship management has focused much on MNE buyers' perspectives and paid little attention to the suppliers' perspectives. This study extends this stream of research by empirically examining how suppliers can govern their MNEs' customers via different governance mechanisms. The findings extend literature on virtual integration and show that virtual integration can complement detailed contract and safeguard opportunism, which in turn, enhance relationship performance in international customer–supplier relationships.

Opportunism and conflict as precursors of non-economic and economic satisfaction outcomes in seller–customer business relationships

Abstract: The study explores a seller’s perspective of the influence of opportunism and conflict, which are negatively loaded constructs, on non-economic satisfaction as a positively loaded construct. It fur...

Performance implication of supplier relationship quality: a structural analysis

Abstract: This study aims to examine the impact of supplier relationship quality on curtailing opportunism and promoting cooperation between the exchange partners. It also investigates the contingent impact of contract specificity on the relationships and assesses performance implications of relationship quality for both buyer and its major supplier in the exchange.,Confirmatory factor analysis and path analysis were performed based on data collected from manufacturers in a survey. The hypotheses were tested using path analysis.,The findings of this study indicate a pivotal role of supplier relationship quality in suppressing opportunism and enhancing cooperation between exchange parties, which lead to dyadic performance. Furthermore, the effect of supplier relationship quality is strengthened by contract specificity.,This study adds value to the existing streams of studies in several ways. First, informed by the nexus of relational capital theory and transaction cost economics, the authors emphasize the pivotal role of relationship quality in curtailing opportunism and fostering cooperation and the moderating effect of contract specificity on the above linkages. Second, this study provides empirical evidence of the mechanism of the effect of contract specificity on opportunism and cooperation.

The impact of relative governance on B2B firms’ value appropriation from industrial buyer–seller relationships: empirical evidence from China

Abstract: This paper aims to investigate how relative contractual and relational governances impact seller’s value appropriation via buyer’s trust, perceived justice and opportunism in the context of industrial buyer–seller relationships.,Survey data from 232 matched buyer-seller dyads of Chinese business-to-business (B2B) firms was used to test the conceptual model and research hypotheses. The confirmatory factor model and structural equation model were tested by using Lisrel 8.80.,The findings show that relative contractual governance and relative relational governance have opposite consequences on B2B relationship and value outcomes. Relative contractual governance generates higher level of buyer’s opportunist behavior because it reduces buyer’s trust and perceived justice, therefore harms seller’s value appropriation. By contrast, relative relational governance enhances buyer’s trust and perceived justice, therefore curbs buyer’s opportunism and improves seller’s value appropriation.,This study makes significant contributions to theory development of value appropriation and inter-firm governance mechanism by extending dyadic view to network view. It proposes the concept of relative governance and explores its role in shaping a business partner’s perception and behavior. It also provides insightful implications for B2B companies on capturing more benefits from the relationship with buyers by leveraging relative governance strategies.

The Dark Side of Cultural Intelligence: Exploring Its Impact on Opportunism, Ethical Relativism, and Customer Relationship Performance

Abstract: Employees who possess cross-cultural capabilities are increasingly sought after due to unparalleled numbers of cross-cultural interactions. Previous research has primarily focused on the bright side of these capabilities, including important individual and work outcomes. In contrast, the purpose of this study is to demonstrate that the cross-cultural capability of cultural intelligence (CQ) can lead to both positive and negative outcomes. Applying the general theory of confluence, we propose that expatriates high in CQ excel in customer relationship performance, while simultaneously behaving opportunistically. We also suggest that ethical relativism moderates these relationships. Using mixed methods, four separate studies generally support our predictions while also deepening our understanding of various forms of opportunism and the mechanism behind two seemingly opposing effects. Conceptual and managerial implications of CQ for opportunism, customer relationship performance, and ethics are discussed.

Light in Dark Places: The Hidden World of Supply Chain Fraud

Abstract: Interorganizational fraud, or fraud that occurs between organizations, is a critical component of supply chain fraud and supply chain relational risk, yet empirical evidence on the scale of interorganizational fraud and its antecedents remains scant. Despite its hidden nature, interorganizational fraud can have major implications for supply chain performance. Based on the theories of transaction cost economics, agency theory, and the fraud triangle, widely used in accounting and auditing research, five potential antecedents of supply chain fraud are considered and compared with reported losses due to interorganizational fraud. The data collected via a survey questionnaire with a sample of 151 supply chain employees in manufacturing demonstrate that informants estimated median losses due to interorganizational fraud to be 9% of their firm's total revenue. The most common types of fraud reported include product quality fraud, pricing/invoicing fraud, and corruption. Using a two-step generalized method of moments technique for estimation, the results found that transactional complexity, competitive pressures facing the supply chain, and weak firm ties were significantly related to interorganizational fraud, and that supply chain monitoring and ethical sourcing were not significantly related to interorganizational fraud. These findings contribute to the research on relational risk, supply chain risk management, and opportunism.

What Does It Mean When Managers Talk About Trust

Abstract: This paper investigates whether managerial rhetoric in the Management Discussion and Analysis section of 10-K filings can help gauge the level of managerial opportunism in a firm. We find that the use of trust-related words is connected to inefficient investment decisions and poor operating performance. Furthermore, firms making more frequent use of trust-related words are subject to less monitoring by institutional investors or analysts. Their accounting also relies more heavily on discretionary accruals. These results are consistent with the notion that managerial rhetoric to advertise trustworthiness points towards agency problems plaguing the firm.