Relational exchange arrangements supported by trust are commonly viewed as substitutes for complex contracts in interorganizational exchanges. Many argue that formal contracts actually undermine trust and thereby encourage the opportunistic behavior they are designed to discourage. In this paper, we develop and test an alternative perspective: that formal contracts and relational governance function as complements. Using data from a sample of information service exchanges, we find empirical support for this proposition of complementarity. Managers appear to couple their increasingly customized contracts with high levels of relational governance (and vice versa). Moreover, this interdependence underlies their ability to generate improvements in exchange performance. Our results concerning the determinants of these governance choices show their distinct origins, which further augments their complementarity in practice. Copyright © 2002 John Wiley & Sons, Ltd. Transaction cost economics (TCE) has emerged as a common framework for understanding how managers craft governance arrangements. The general proposition of this literature is that managers

Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm s sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.

On behalf of:

We develop a theoretical model to describe and explain variation in corporate governance among advanced capitalist economies, identifying the social relations and institutional arrangements that shape who controls corporations, what interests corporations serve, and the allocation of rights and responsibilities among corporate stakeholders. Our “actor-centered ” institutional approach explains firm-level corporate governance practices in terms of institutional factors that shape how actors’ interests are defined (“socially constructed”) and represented. Our model has strong implications for studying issues of international convergence. Corporate governance concerns “the structure of rights and responsibilities among the parties with a stake in the firm ” (Aoki, 2000: 11). Yet the diversity of practices around the world nearly defies a common definition. Internationalization has sparked policy debates over the transportability of best practices and has fueled academic studies on the prospects of international convergence (Guillén, 2000; Rubach & Sebora, 1998; Thomas & Waring, 1999). What the salient national differences in corporate governance are and how they should best be conceptualized remain hotly debated (Gedajlovic & Shapiro,

Vertically coordinated ties are purportedly effective responses to the uncertainties of fastchanging purchasing environments. Building on transaction costs arguments, and related work in marketing, we analyze vertical coordination as a response to external uncertainty. We show that its effectiveness is highly contingent on the magnitude of the safeguarding problem present. Indeed, its beneficial effects can be overwhelmed by the consequential increase in trading hazards. We use survey data from a sample of 161 industrial buyers to test our hypotheses. When specific investments are modest, greater vertical coordination diminishes transaction difficulties in adapting to high environmental uncertainty. On the other hand, vertical coordination increases transaction difficulties in adapting to high environmental uncertainty when specific investments are substantial. We discuss the importance to these results for transaction cost theory. We develop our results into a managerial decision framework for designing purchasing ties that balances safeguarding and adaptation. 2 When Does Vertical Coordination Improve Industrial Purchasing Relationships?

ABSTRACT: In hybrid situations where artificial agents and human agents interact, the artificial agents must be able to reason about the trustworthiness and deceptive actions of their human counterpart. Thus a theory of trust and deception is needed that will support interactions between agents in virtual societies. There are several theories on trust (fewer on deception!), but none that deals specifically with virtual communities. Building on these earlier theories, the role of trust and deception in virtual communities is analyzed, with examples to illustrate the objectives a theory of trust should fulfill. KEY WORDS AND PHRASES: Deception, multiagent systems, trust, virtual society. The inhumanity of the computer is in the fact that once programmed and put to work, it behaves in a perfectly honest way. —Isaac Asimov Trust and Deception in Artificial Agents and Societies Electronic commerce can only succeed if the general public trusts the virtual environment. Trust, therefore, is an important issue [20, 25, 29, 44]. As is well

This paper develops an approach to organizational governance decisions that recognizes how the choice of organizational governance form affects both the creation and appropriation of economic value. The paper begins with a detailed survey of three theoretical approaches— transaction cost economics (TCE), the resource based view (RBV), and real options analysis (RoA) to the study of organizational governance. This review serves to provide background material on each theory as well as to identify the similarities and differences in the assumptions underlying these perspectives. A concluding section provides a series of propositions for future empirical research that may help to integrate these theories by incorporating notions of both value creation and value appropriation.

Proponents of the knowledge-based approach to the firm argue that organizational economics put all the burden on the allocation of incentives and property rights in the explanation of organizational phenomena, and neglects firm-specific knowledge and processes of learning. We argue that there is no inherent reason why organizational economics should be cut off from treating learning and exploring its organizational implications. More specifically, we demonstrate that it is possible to adopt an approach to learning that is consistent with rational choice methodology and stresses economizing, puts the emphasis on learning as a means of realizing efficiencies, is micro-analytic, and contains implications for economic organization. We concentrate on the role of experimentation as a means of finding solutions to coordination problems in complex production systems (e.g., finding the optimal sequence of activities) and the transaction costs learning-by-experimenting may create. Such transaction costs help determine the existence, boundaries and internal organization of the firm, and has implications for the understanding of competitive advantage

*The authors particularly thank Jackson Nickerson and Bart Hamilton for helpful suggestions in

Researchers criticize the transaction cost economics (TCE) paradigm for over-generalizing the assumption of opportunism as human nature. We suggest that opportunistic propensity is affected by cultural prior conditioning of individualism–collectivism (I–C). Specifically, we propose that individualists have a higher opportunistic propensity in intra-group transactions, and collectivists in inter-group transactions. Our cultural specification of opportunism helps TCE to more effectively accommodate some criticisms and more realistically deal with problems of economic organization in today’s global economy. © 2002 Elsevier Science Inc. All rights reserved. “Culture serves as a check on opportunism.” — Williamson (1993b: 476) First proposed by Coase (1937) and later popularized by Williamson (1975, 1985), transaction cost economics (TCE) has become a major paradigm in social science research (Masten, 1993). One of its key building blocks is the assumption of opportunism, because individuals “will not reliably self-enforce promises but will defect from the letter and spirit of an agreement when it suits their purposes, ” and “a healthy regard for opportunism is essential