Download or read book Asset Specificity and Transaction Structures written by Brian JM Quinn and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a case study of a class of transaction that is well understood in the context of economic theory but that is under-analyzed empirically. Asset specific investments present special contractual challenges. Because specific investments are particular to a single location, use or customer, their next best use is of much lower value than the use for which they are initially proposed. Consequently, asset specific investments face the threat of ex post opportunism leading to a potential allocative inefficiency. This contracting problem is particularly difficult where firms that are otherwise rivals must coordinate individual specific investments in order to create a valuable shared resource. In such cases, generating credible expectations of cooperation among rivals is critical to coordinating these investments. The case of @Home is an example of how rivals were able to employ 'hybrid' structures including contractual safeguards, including joint ownership, specialized governance devices, and economic lock-in, to overcome the problem of asset specificity and then build out a nationwide cable-based online service network during the 1990's. As the market developed alternatives to the @Home service and the technologies and assets of @Home became less specific the economic lock-in required to hold the venture together failed to materialize and @Home collapsed. The ultimate failure of @Home points out that strategies to provide the proper ex ante incentives many not always be durable, leaving contracting parties with less than perfect options.

Download or read book Asset Specificity and Vertical Integration written by Christian A. Ruzzier and published by . This book was released on 2009 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: A point repeatedly stressed by transaction cost economics is that the more specific the asset, the more likely is vertical integration to be optimal. In spite of the profusion of empirical papers supporting this prediction, recent surveys and casual observation suggest that higher levels of asset specificity need not always lead to vertical integration. The purpose of this paper is to uncover some of the factors driving firms to (sometimes) choose to remain separated, rather than integrate, in the presence of high specificity. Its main economic message is that in a world where outside options matter and investments are multidimensional, high levels of asset specificity can foster nonintegration: a low level of specificity provides the most misdirected incentives when transacting in a market (because the outside option of external trade becomes so tempting), thus making a stronger case for nonintegration when specificity is high.

Download or read book Levels of Asset Specificity in Relational Contracting written by Christian A. Ruzzier and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard property rights theory (whether static or dynamic) assumes assets are specific, but once this assumption is in place, the level of asset specificity has no bearing on the make-or-buy decision. While there are good reasons to doubt the universality of transaction cost economics' prediction that the more specific the asset, the more likely is vertical integration to be optimal, this is an issue that cannot be addressed within the existing property rights framework. In this paper, I provide a simple and straightforward way of incorporating these different levels of asset specificity in a relational-contracting property-rights model of the firm, and show that they matter even in a static model. Using the Outside Option principle in bargaining results in a model in which the integration choice is affected in a non-trivial way by realized asset specificity. For instance, I find that vertical integration is the efficient response to widely varying supply prices as long as the level of asset specificity is low enough. When asset specificity is high, on the other hand, the incentives of the upstream party are best aligned with those of the downstream party and incentives may be best provided under outsourcing. In general, under bargaining with outside options, the first best is easier (harder) to achieve with outsourcing than with integration when the degree of asset specificity is high (low).

Download or read book Strategy Asset Specificity and Capital Structure written by Yitsḥaḳ Yaʻaḳov Fuḳs and published by . This book was released on 1993 with total page 348 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Options written by Lenos Trigeorgis and published by MIT Press. This book was released on 1996-03-14 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. In the 1970s and the 1980s, developments in the valuation of capital-investment opportunities based on options pricing revolutionized capital budgeting. Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace. In this book Lenos Trigeorgis, who has helped shape the field of real options, brings together a wealth of previously scattered knowledge and research on the new flexibility in corporate resource allocation and in the evaluation of investment alternatives brought about by the shift from static cash-flow approaches to the more dynamic paradigm of real options—an approach that incorporates decisions on whether to defer, expand, contract, abandon, switch use, or otherwise alter a capital investment. Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. Also discussed are the strategic value of new technology, project interdependence, and competitive interaction. The ability to value real options has so dramatically altered the way in which corporate resources are allocated that future textbooks on capital budgeting will bear little resemblance to those of even the recent past. Real Options is a pioneer in this area, coupling a coherent picture of how option theory is used with practical insights in into real-world applications.

Download or read book Asset Specificity and the Ownership of Buildings written by Jilnaught Wong and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of asset specificity on firms' decisions to own or lease their buildings. We present evidence that these decisions are primarily a function of efficiency concerns rather than opportunistic motives. We predict that firms requiring highly specific buildings in their operations are more likely to own, rather than to lease, their buildings, and we provide empirical evidence that supports our prediction, after controlling for potential opportunism. Our findings provide rare large-sample evidence consistent with a theoretical link between asset specificity and asset ownership as argued in the literature on economic organization.

Download or read book The Mechanisms of Governance written by Oliver E. Williamson and published by Oxford University Press. This book was released on 1996-02-29 with total page 446 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together in one place the work of one of our most respected economic theorists, on a field in which he has played a large part in originating: the New Institutional Economics. Transaction cost economics, which studies the governance of contractual relations, is the branch of the New Institutional Economics with which Oliver Williamson is especially associated. Transaction cost economics takes issue with one of the fundamental building blocks in microeconomics: the theory of the firm. Whereas orthodox economics describes the firm in technological terms, as a production function, transaction cost economics describes the firm in organizational terms, as a governance structure. Alternative feasible forms of organization--firms, markets, hybrids, bureaus--are examined comparatively. The analytical action resides in the details of transactions and the mechanisms of governance. Transaction cost economics has had a pervasive influence on current economic thought about how and why institutions function as they do, and it has become a practical framework for research in organizations by representatives of a variety of disciplines. Through a transaction cost analysis, The Mechanisms of Governance shows how and why simple contracts give way to complex contracts and internal organization as the hazards of contracting build up. That complicates the study of economic organization, but a richer and more relevant theory of organization is the result. Many testable implications and lessons for public policy accrue to this framework. Applications of both kinds are numerous and growing. Written by one of the leading economic theorists of our time, The Mechanisms of Governance is sure to be an important work for years to come. It will be of interest to scholars and students of economics, organization, management, and law.

Download or read book The Many Faces of Asset Specificity written by Glauco De Vita and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a review of the concept of asset specificity and of the impact which asset specificity is expected to exert on the performance of buyer-supplier relationships. The paper begins by unpacking the complex definitional features of asset specificity and how its multifaceted nature is reflected in an inconsistent and rather ad hoc operationalization of the construct in the extant empirical literature. Following a comprehensive examination of the many dimensions of asset specificity, the review then focuses on the expected role of asset specificity in inter-firm relationships according to three different theoretical perspectives: transaction costs economics, the resource-based view and relational exchange theory. Considerable ambiguities and inconsistencies are highlighted by reviewing hypotheses typically developed within their respective theoretical framework. The paper concludes by identifying key challenges and new directions in order to derive maximum benefit from future research.

Download or read book Asset Specificity and Firm Value written by Joon Ho Kim and published by . This book was released on 2017 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the effect of asset specificity on a target firm's value in a merger. Using US merger data, I show that, when their industry experiences a negative cash flow shock, target firms that consist of more industry-specific real assets receive a lower merger premium than do those consisting of more generic assets. Results also suggest that the asset specificity discount in the target return is more pronounced if target firms are financially distressed. However, the negative value effect of asset specificity is mitigated in the presence of financially unconstrained industry rivals who place high value on the targets' assets, compete for the targets, and, thereby, are more likely to acquire the targets. Overall, the results are consistent with the hypothesis that asset specificity of a firm is an important determinant of the firm's value.

Download or read book Asset Specificity and Economic Organization written by and published by . This book was released on 1985 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book non contractibility and asset specificity in reverse auctions written by sunil mithas, joni jones, and will mitchell and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Strategy Asset Specificity and Capital Structure written by Isaac Jacob Fox and published by . This book was released on 1993 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Interaction of Uncertainty and Asset Specificity in Component Make Or Buy Decisions written by Gordon Walker and published by Sagwan Press. This book was released on 2015-08-23 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work.This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work.As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.

Download or read book Market induced Asset Specificity written by Shira Batya Lewin-Solomons and published by . This book was released on 2003 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Specificity Firm Heterogeneity and Capital Structure written by Srinivasan Balakrishnan and published by . This book was released on 1991 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Specificity and Change written by Bruno Dallago and published by . This book was released on 1999 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Specificity and Vertical Integration written by Ola Kvaløy and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset specificity is usually considered to be an argument for vertical integration. The main idea is that specificity induces opportunistic behavior, and that vertical integration reduces the cost of preventing opportunism. In this paper I show that asset specificity can be an argument for non-integration. In a repeated-game model of self-enforcing relational contracts, it is shown that when parties are non-integrated, increasing degrees of asset specificity make it possible to design relational contracts with higher-powered incentives.