Toward Behavioral Transaction Cost Economics: Theoretical Extensions and an Application to the Study of MNC Subsidiary Ownership 9783030468774

Adopting a critical realist position, this book renders transaction cost economics (TCE) into a behavioral theory of org

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English Pages 377 [386] Year 2020

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Table of contents :
List of Figures
List of Tables
1 Is Transaction Cost Economics Behavioral?
1.1 Introduction
1.2 Why Behavioral Reasoning of the Firm?
1.3 Characteristics of Behavioral Theories of the Firm
1.4 Opposing Views About Whether TCE Is Behavioral
1.5 An Evaluation of Whether TCE Is Behavioral
1.6 What Prevents TCE from Being Behavioral?
1.7 A Roadmap of Chapters Ahead
2 Clarifying Key Terms and Philosophical Foundations of Transaction Cost Economics
2.1 The Serious Conflation Among Opportunism, Bounded Rationality and Uncertainty
2.2 Confusion About Uncertainty
2.3 A Proposition to Increase Definitional Precision
2.3.1 Conceptual Separation of Bounded Rationality, Uncertainty, and Opportunism
2.3.2 Uncertainties Should Be Classified According to Controllability
2.3.3 Benefits of Classifying Uncertainties Based on Controllability
2.4 Is Opportunism a Necessary Assumption in TCE?
2.5 TCE Is not Well Suited to the Study of Uncontrollable Uncertainty
2.6 The Philosophical Roots of Confusion About Uncertainty in TCE
2.7 A Call for Critical Realism
2.8 Critical Realism Can Inform Effectuation Theory
2.9 Critical Realism ‘Integrates’ TCE and Effectuation
2.9.1 Deduction, Abduction, and Retroduction
2.9.2 Critical Realism Facilitates a Better Understanding of Generative Mechanisms
2.10 Uncertainty Controllability Makes Effectuation Theory Coherent
2.11 Ergodic/Nonergodic Uncertainties: A False Distinction According to Critical Realism
2.11.1 The Ontological Confusion in the Ergodic/Nonergodic Distinction
2.11.2 Ontological Depth of Critical Realism Integrates Ergodic/Nonergodic Uncertainties
2.11.3 Critical Realism and the Long-Run Applicability of Transaction Cost Economics
2.12 Assumptional Symmetry and Ontological Unification
3 Opportunism and Bounded Rationality in Transaction Cost Economics: Values, Attitudes, or Behaviors?
3.1 The Value-Attitude-Behavior Hierarchy
3.2 The Link Between Value-Attitude-Behavior Hierarchy and Critical Realism
3.3 The Link Between Critical Realism and the Emic-Etic Distinction
3.4 Opportunism and Bounded Rationality Should Be Treated as Attitudes
3.4.1 Opportunism as Attitude
3.4.2 Bounded Rationality as Attitude
3.5 An Institutional Approach to Opportunism and Bounded Rationality as Attitudes
3.5.1 National Ethical Attitude as a Measure of ‘Opportunism as an Attitude’
3.5.2 Cultural Distance as a Measure of ‘Bounded Rationality as an Attitude’10
4 Modeling Bounded Rationality: Mediation or Moderation—Or Bounded Rationalizing?
4.1 The Distinction Between the Brain, the Mind and the Self
4.2 The Theory of the Human Brain
4.3 The Eight-Consciousness Model of the Mind
4.4 The Eight-Consciousness Model Can Inform the Theory of Bounded Rationality
4.5 The Conceptual Separation of Cognitive Bounds from (Bounded) Rationalizing
4.5.1 (Bounded) Rationality: Substantive Rationality vs Procedural Rationality
4.5.2 The Need for More Precise Terms: Cognitive Bounds and Rationalizing
4.5.3 Moving ‘Rationalizing’ to the Front Seat
4.6 The Social Extensibility of Cognitive Bounds
4.7 Cultural Distance Is Central to Transaction Cost Economics by Affecting Mental Bounds
4.8 Cultural Distance Contextualizes Effectuation
4.9 Modeling Bounded Rationality: The Increasingly More Efficient Use of Cognitive Bounds
4.10 The Manas-Centric, CR-Informed Approach Informs Penrose (1959)
4.11 Boundedly Rational Behavior Arising from CD: Assimilation Bias and Contrast Bias
4.11.1 Assimilation Bias and Contrast Bias
4.11.2 ‘Cultural Overconfidence Bias’ (Over-Optimism) and ‘Cultural Discounting Bias’ (Over-Pessimism)
4.12 A Behavioral Theory Should Be a Self-Conscious Theory
5 Toward Behavioral Transaction Cost Economics and Beyond
5.1 A Recap of Proposals Developed in Previous Chapters to Render TCE Behavioral
5.2 Prospect Theory Provides the Overarching Generative Mechanisms in Decision-Making
5.2.1 Prospect Theory in a Nutshell
5.2.2 Prospect Theory Needs to Be Contextualized in Critical Realism
5.2.3 Uncertainty Controllability and the Framing Effect
5.2.4 Coping with Uncertainties: The Impacts of Optimism/Pessimism Arising from CD
5.3 A Broader Behavioral Framework: Behavioral TCE and Behavioral ROT as Two Sides of the Same Coin
5.4 Advantages of the Behavioral TCE Framework
5.5 Implications of Assumptional Symmetry: Structural Model Vs. Reduced Model
5.5.1 Assumptional Symmetry and Theoretical Advancement
5.5.2 Assumptional Symmetry and Structure Model vs Reduced Model
6 An Empirical Application to MNC Subsidiary Ownership
6.1 Hypothesis Development
6.1.1 National Ethical Attitude and Subsidiary Ownership Level
6.1.2 Cultural Distance and Subsidiary Ownership Level—A Reconceptualization
6.1.3 The Interaction Between National Ethical Attitude and Cultural Distance
6.1.4 The Three-Way Interaction Between National Ethical Attitude, Cultural Distance, and Host Country Experience
6.2 Date and Measures
6.2.1 Dependent and Independent Variables
6.2.2 Control Variables
6.3 Method
6.4 Results
7 Implications, Future Directions, and Conclusion
7.1 A Bird’s-Eye View of the Concepts Used in the Book
7.2 Theoretical Implications for Transaction Cost Economics
7.3 Theoretical Implications for International Business
7.3.1 What Should Be in the Driver’s Seat: Bounded Rationality or Opportunism?
7.3.2 Transaction Cost Economics and Internalization Theory/OLI Paradigm Relationship Between Traditional TCE and Internalization Theory/OLI Paradigm Distance Unifies Behavioral TCE and OLI Paradigm Behavioral TCE Subsumes the OLI Paradigm
7.3.3 Critical Realism Ontologizes OLI and Promises the Rebirth of International Business
7.4 The Potential of International Business Becoming the Base Camp for Behavioral TCE
7.5 Other Theoretical Implications
7.5.1 For Effectuation Theory
7.5.2 For Prospect Theory
7.5.3 For Penrose’s (1959) Theory of the Growth of the Firm
7.5.4 Implications for Symmetrical Assumption Thinking and Explanatory Unification Explanatory Unification: Derivational Unification vs. Ontological Unification Explanatory Unification and the OLI Paradigm
7.6 Practical Implications
7.6.1 Implications for Management Focus
7.6.2 Implications for Performance, Learning, and Competitiveness
7.7 Future Research Directions
7.7.1 Resolving the ‘Uncertainty Paradox’
7.7.2 Resolving the ‘Cultural Distance Paradox’: Black Box vs. Mechanism It Is Erroneous to Focus on the Direct Effects of Cultural Distance Studying the Effect of Cultural Distance on Ownership Level Rather Than Mode Precise Conceptualization of Cultural Distance Cultural Distance Is a Symmetrical Construct: Empirical Implications Meta-Reviews on the Interaction Rather Than Main Effects of Cultural Distance Resolving the ‘Cultural Distance Paradox’ of Performance
7.7.3 CD Is Dead, Long Live CD: A Call for a Paradigm Shift from Distance to Biases
7.7.4 Exploring Other Distance Measures
7.7.5 Exploring Other Controllable Uncertainties
7.7.6 Use Uncertainty Controllability as a Continuous Variable
7.7.7 Are TCE Relationships Merely Empirical Regularities and/or Self-fulfilling Prophecy?
7.7.8 The Formalization of Transaction Cost Economics
7.8 Conclusion

Toward Behavioral Transaction Cost Economics: Theoretical Extensions and an Application to the Study of MNC Subsidiary Ownership

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