Assessing the Property Rights and Transaction-Cost Theories of Firm Scope

2001 ◽  
Vol 91 (2) ◽  
pp. 184-188 ◽  
Author(s):  
Michael D Whinston
Keyword(s):  
Property Rights ◽  
Transaction Cost ◽  
Firm Scope

scholarly journals Towards a Theory of Innovation Governance and the Role of IPRs

2020 ◽  
Vol 69 (4) ◽  
pp. 341-354
Author(s):  
Ove Granstrand
Keyword(s):  
Property Rights ◽  
Transaction Cost ◽  
Open Innovation ◽  
Organization Theory ◽  
Supply And Demand ◽  
Theoretical Perspective ◽  
Hybrid Approach ◽  
Institutional Arrangement ◽  
Innovation Governance

Abstract This paper theorizes about innovation governance, especially about governance of open innovation and the nature and role of IPRs. A reinterpretation of open innovation is offered in terms of the emergence of various types of markets for inputs to and outputs from innovative activities. These open innovation markets are typically markets for ideas, technologies, knowledge and data such as licensing markets, equity markets, and matching markets for innovation collaborations and correspond to various types of open innovation strategies viewed from the inside out in a focal firm's perspective. Open innovation – seen as a set of quasi-integrated organizational forms for innovative activities in between market and hierarchical firm organizations – is then explainable in terms of determinants of supply and demand. Intellectual property rights (IPRs) then play a new role as tools for innovation governance, thereby economizing on governance costs in an extended transaction cost framework. Licensing of usage rights is key to using IPRs for innovation governance. The by now standard property rights approach to rights in intellectual resources has to be challenged, however, and referred to as ‘intellectual rights’ rather than IPRs. In addition, the governing role of IPRs can be improved by combining them with liabilities into a hybrid approach. Organizational responsibilities provide still another institutional arrangement for innovation governance, and integration of rights, liabilities and responsibilities provide a new theoretical perspective on innovation governance – a perspective that also can provide links between organization theory, transaction cost economics and property rights theory.

The Coase Theorem and Core Theory

2017 ◽  
Vol 4 (2) ◽  
Author(s):  
Varouj A. Aivazian ◽  
Jeffrey L. Callen
Keyword(s):  
Property Rights ◽  
Transaction Cost ◽  
Social Cost ◽  
Transaction Cost Economics ◽  
Coase Theorem ◽  
Seminal Paper ◽  
Core Theory ◽  
Economics Of Institutions

AbstractThe writings of Ronald Coase, along with those of Armen Alchian and Harold Demsetz, on the theory of property rights, transaction cost economics, and the economics of institutions have yielded powerful insights and transformed many areas of economics. The seminal paper of Ronald Coase (Coase 1960, “The Problem of Social Cost,”

Vertical Integration and the Theory of the Firm

2019 ◽  
Author(s):  
Jongwook Kim
Keyword(s):  
Comparative Analysis ◽  
Property Rights ◽  
Agency Theory ◽  
Transaction Cost ◽  
Vertical Integration ◽  
Joint Ventures ◽  
Transaction Cost Economics ◽  
Neoclassical Theory ◽  
Property Rights Theory ◽  
Theoretical Foundations

How do firms organize economic transactions? This question can be thought of as a question of firm boundaries or as a decision about a firm’s scope, encompassing the choice along a continuum of governance structures, including spot markets, short-term contracts, long-term contracts, franchising, licensing, joint ventures, and hierarchy (integration). Although there is no unified theory of vertical integration, transaction cost economics, agency theory, and more recently property rights theory have been influential not only in analyzing make-or-buy decisions but also in understanding “hybrid forms” or inter-firm alliances, such as technology licensing contracts, equity alliances, joint ventures, and the like. Before Coase’s work became widely known, whatever theoretical underpinnings there were of vertical integration were provided by applications of neoclassical theory. Here, the firm was viewed as a production function that utilized the most technologically efficient way to convert input into output. In particular, neoclassical theory was concerned primarily with market power and the distortions that it created in markets for inputs or outputs as the main driver of vertical integration. Hence, the boundaries of the firm—that is, where to draw the line between transactions that occur within the firm and those outside the firm—were irrelevant within this framework. It was Coase’s question “Why is there any organization?” that first suggested that price mechanisms in the market and managerial coordination within firms were alternative governance mechanisms. That is, the choice between these alternative mechanisms was driven by a comparative analysis of the costs of implementing either mechanism. Oliver Williamson built on Coase to provide the theoretical foundations for vertical integration by joining uncertainty and small numbers with opportunism in defining exchange hazards, and consequently established comparative analysis of alternative governance forms as the way to analyze vertical integration. More recently, property rights theory brought attention to ownership of key assets as a way to distinguish between the governance of internal organizations and those of market transactions, where ownership confers the authority to determine how these assets will be utilized. And lastly, agency theory also provides important building blocks for understanding contractual choice by placing the emphasis on the different incentives that vary with different contractual arrangements between a principal and its agent. Transaction cost economics, property rights theory, and agency cost theory complement one another well in explaining vertical integration in terms of alternative governance forms in a world of asymmetric information, bounded rationality, and opportunism. These theories have also been utilized in analyzing “hybrid” organizational forms, in particular strategic alliances and joint ventures. Together, vertical integration and alliances account for a significant part of corporate strategy decisions, and more research on the theoretical foundations as well as novel ways to apply these theories in empirical analyses will be productive avenues for a better understanding of firm behavior.

Property Rights and Transaction Costs in Marriage: Evidence from Prenuptial Contracts

1999 ◽  
Vol 59 (1) ◽  
pp. 68-103 ◽  
Author(s):  
Gillian Hamilton
Keyword(s):  
Human Capital ◽  
Property Rights ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Legal Environment ◽  
Legal Institutions ◽  
Family Labor ◽  
Capital Acquisition ◽  
Marital Property ◽  
Joint Ownership

I examine prenuptial contracting behavior in early-nineteenth-centuiy Quebec to explore property rights within families and the efficacy of marital property laws. Drawing on a transaction cost framework, I examine the decision to sign a contract and couples' property rights choices. I find, for example, that couples signing contracts tended to choose joint ownership of property when wives were particularly important to the household. These findings illustrate the potential effects of legal institutions on individuals' behavior (such as the importance of family labor, human capital acquisition, and even mating decisions) and the value of a flexible legal environment.

scholarly journals Explaining agro-industrial contract breaches: the case of Brazilian tomatoes processing industry

2007 ◽  
Vol 45 (4) ◽  
pp. 899-920 ◽  
Author(s):  
Decio Zylbersztajn ◽  
Lygia B. Nadalini
Keyword(s):  
Panel Data ◽  
Asymmetric Information ◽  
Property Rights ◽  
Transaction Costs ◽  
Transaction Cost ◽  
Transaction Cost Theory ◽  
Public Enforcement ◽  
Processing Industry ◽  
Limited Dependent Variable ◽  
Brazilian Northeast

Three hundred small tomato growers located in Brazilian northeast states, supplied a processing industry. In view of the large number of contract hazards and weak enforcement of clauses, managers have decided to move to the Midwest, where a reduced number of larger farmers have been contracted. The industry blamed high transaction costs due to the weak mechanism of public enforcement of property rights. The industry blamed some farmers of selling the product at the market for fresh consumption. Also, farmers blamed the industry for taking advantage of asymmetric information related to quality. This study presents an analysis of contract architecture and an evaluation of effects of transaction costs related variables on the likelihood of contract breaches. A panel data study with 1,523 observations and limited dependent variable models has been formulated to test hypothesis based on transaction cost theory. Results show that opportunism and the absence of courts guarantees of property rights precluded the possibility of achieving a stable contract relationship in the region.

scholarly journals The Boundaries of the Firm Revisited

1998 ◽  
Vol 12 (4) ◽  
pp. 73-94 ◽  
Author(s):  
Bengt Holmström ◽  
John Roberts
Keyword(s):  
Property Rights ◽  
Transaction Cost ◽  
Transaction Cost Economics ◽  
Firm Boundaries ◽  
Investment Incentives ◽  
Asset Ownership ◽  
Boundaries Of The Firm ◽  
Ex Post ◽  
Satisfactory Account ◽  
Rights Theories

Both transaction cost-economics and property-rights theories offer explanations of the boundaries of the firm based on ideas of ex post bargaining and holdup. These theories are quite distinct in their empirical predictions, but neither offers a satisfactory account of a large variety of observed practices. The authors discuss a number of such examples, where the boundaries of the firm seem to be determined by factors other than the need to protect investments, and where other mechanisms than the allocation of asset ownership are used to provide investment incentives. These examples indicate the need to enrich their theory of firm boundaries.

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