Opportunism

About: Opportunism is a research topic. Over the lifetime, 2030 publications have been published within this topic receiving 97170 citations. The topic is also known as: opportunist.

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.

The rationality-of-ends/market-structure grid: positioning and contrasting different approaches to business ethics

Abstract: This paper presents the ‘rationality-of-ends/market-structure grid’. With this grid, the article contrasts, in economic terms, different approaches to business ethics and addresses the question how far and what type of business ethics is feasible. Four basic scenarios for business ethics are outlined that imply different conceptualizations of business ethics. The grid interrelates a rationality-of-ends dimension with a market-structure dimension. The rationality-of-ends dimension ranges from opportunism and self-interested egoism to self-interested altruism and ultimately to authentic altruism. The market-structure dimension ranges from perfect competition/no information problems/perfectly dispersed market power to imperfect competition/high information problems/concentrated power. Rather than presenting economic, legal, ethical and discretionary issues in a hierarchical fashion, the grid interrelates these issues. Conclusions are spelled out regarding the empirical observance of business ethics and the programmatic, ‘theoretical’ positions that are behind empirical observations. Practical implications for managers and public policy makers are outlined.

Natural born opportunists

Abstract: Purpose The purpose of this paper is to adapt research conducted on subclinical psychopaths and Machiavellians to conceptualise false agents in transaction cost economics (TCE). Both opportunism and information asymmetry provide a means to manipulate contractual relationships, pursuing existing loopholes for self-interest, while uncertainty and small-numbers bargaining allow false agents to exploit existing agreements during periods of rapid change, growth, and development. Considering differences in contract length preference may inform our understanding of subclinical psychopaths and Machiavellians. Contextually, the rise of “quasi-governmental” hybrid organisations may produce an ideal prospect for “natural born” opportunists to reap self-interested benefits through contractual loopholes. Design/methodology/approach This theoretical paper addresses social norms and blind trust in contractual relationships. In turn, blind trust may provide clues about the environmental conditions that facilitate manipulation by subclinical psychopaths and Machiavellians during negotiations of contract term length. Findings Williamson’s (1975) TCE framework provides a novel approach to subclinical psychopathic and Machiavellian behaviour by agents. Assumptions about behavioural norms may differ between the contracting party and the agent, leading to positive behavioural expectations of trust such as confidence, reciprocity, and history. The length of the contractual relationship may distinguish subclinical psychopaths from Machiavellians. The subclinical psychopath is more likely to behave opportunistically in short-term contracts, while Machiavellians more likely amass goodwill to behave opportunistically in long-term contracts. The role of uncertainty, small-numbers bargaining, information asymmetry, and opportunism is particularly relevant in quasi-governmental organisations when agents are “natural born” opportunists. Originality/value This theoretical paper adds to discussion of TCE related problems in organisations. “Natural born” opportunistic agents are more likely to take advantage of principals who extend trust as a goodwill gesture in a contractual relationship. Trust often represents a mental shortcut, based on “gut” reactions to save time, especially in dynamic environments. Hybrid organisations represent one such environment, in which contracting of goods and services renders comprehensive monitoring impracticable. Yet, scholarship adheres to legal mechanisms as safeguards against opportunism without acknowledging social norms that guide blind trust. Finally, contrasting motives between principals and false agents creates an inherent relationship asymmetry.

The Economics of Repeated Extortion

Abstract: This paper provides a simple model of repeated extortion. In particular, we ask whether corrupt government officials' ex post opportunism to demand more once entrepreneurs have made sunk investments entails further distortion in resource allocations. We show that the inability of government officials to commit to future demands does not distort entry decisions any further if technology is not a choice variable for the entrepreneurs. The government official can properly discount the initial demand in order to induce the appropriate amount of entry. If, however, the choice of technology is left to the entrepreneurs, the dynamic path of demand schedules will induce entrepreneurs to pursue a "fly-by-night" strategy by adopting a technology with an inefficiently low sunk cost component. In this case, we show that the unique equilibrium is characterized by a mixed strategy of the government official in future demand. Our model thus explains why arbitrariness is such an inseparable feature of corruption. We also investigate implications of the stability of the corrupt regime for dynamic extortion and discuss how our framework can be applied to other investment contexts involving the risk of expropriation.