4.5.2. Resource specificity and its types

One of the most important characteristics of a transaction is the nature of the capital investments made by the participants in the transaction. When you buy bread from a baker, neither party is investing in just that very specific deal. The baker invests in bakery equipment, however, he supplies bread not only to you, but to a large number of customers, and if you refuse to buy bread from him, then your decision will not affect the value of the investment in bakery equipment. However, if you are stamping parts for a specific brand of car under a contract with a major automotive company, then your investment in this unique stamping equipment will be worthless if that company announces the termination of the contract. These investments are called specific because they lose most of their value outside of that particular transaction. If this equipment is used for other purposes, then much of its value will be lost.
For the first time, the concept of resource specificity was introduced into economic theory by G. Becker in 1964 in relation to investments in human capital. If a resource is of interest to many producers, and its market value does not depend much on where it is used, then this is a general-purpose resource. A specific resource is a resource that, if the transaction is interrupted, cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced if it is used elsewhere.
In the literature there are the following types resource specificity:
1. Site specificity is associated with too much cost of moving a resource. It is possible to assume the presence of location specificity if the enterprises are located in geographical proximity to each other. An example of location specificity would be a power plant built in close geographic proximity to a coal mine. This location saves on transport costs and the costs associated with storing coal reserves. After the IPO, the parties will maintain bilateral relations throughout the life of the power plant. Steel production and rolling mills are also built in close proximity to each other. Here, savings are achieved due to the absence of the need to heat the steel.
2. Physical asset specificity. The specificity of physical capital is said to be when the parties or one of the parties has invested in equipment with certain characteristics, which has less value when used in other projects. An example is the furnaces of power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition). Deviation from the type of coal for which this equipment is designed, due to a break in relations with its supplier, will require complex work to change the furnace, which is associated with significant costs resources .
3. Specificity human capital(human asset specificity). The specificity of human capital is said to be when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than the same workers do, but do not have specific human capital. An example of specific human capital is the manager's knowledge of the administrative features and management culture of the firm in which he has worked for many years. This specific knowledge is of value only to the given firm and depreciates if the manager loses his job in the given firm, for example, as a result of a hostile takeover of the company he manages. The concept of the specificity of human capital can also refer to the relational skills that arise when working as a team, when all team members know each other well.
4. Specificity of target or “dedicated” assets. Here we are talking about investment in general purpose resources, which, however, may be intended for a single user. The supplier makes this investment in the hope of selling a significant amount of product to a specific customer. If the contract is terminated, then the supplier has significant stocks, since there is no demand for them from other buyers. The same situation can develop on the buyer's side. If he ordered a large number of products and did not receive them, and cannot find the same number of products in the market.
5. Temporal specificity. This is a characteristic of investments where production coordination is essential (for example, in the production of broiler chickens, their freshness and growing time are important, and this complicates the coordination of production; the prompt supply system becomes a decisive success factor here). The value of resources not delivered on time is significantly reduced. This kind of specificity was highlighted by Masten, Meehan, and Snyder in their analysis of the costs of organizing naval shipbuilding in order to highlight the centrality of time and coordination in this activity.
6. Specificity of reputation, trademark (brand name specificity). It is a non-returnable investment in building a reputation or brand that will lose its value if the firm's products or services are of poor quality.

Chapter 4

In the new institutional economics, the market and the firm are viewed as the extremes of a wide range of contractual alternatives. This approach differs significantly from the orthodox neo classical theory, within which the distribution of economic activity between the firm and the market is assumed to be given. Firms turn out to be specialized in the function of production, which ensures the transformation of resources into a product, and markets - in the exchange, within which resources are allocated, on the one hand, and the distribution of manufactured products, on the other.

In neoclassical theory, the firm looks like a "black box", in which resources are transformed into products in accordance with the nature production function, reflecting the chosen technology, and that external environment(market structure), which determines the way to maximize economic profit as the objective function of the firm. At the same time, problems related to the asymmetric distribution of information, the need to make consistent adaptive decisions, the prerequisites for the existence of various administrative and legal forms of organizations, and the creation of a system of incentives for owners, managers and workers within their framework, turn out to be outside the models.

The role of the market is even less clear. Focusing the analysis on the process of establishing market prices does not involve consideration of the mechanism market relations. The study in the neoclassical theory of various market structures refers only to such parameters as the volume of industry output, the price corresponding to equilibrium, the number of firms, product differentiation, etc. In this case, the influence of institutions on facilitating or hindering the exchange process is practically ignored.

Limiting the understanding of a firm to predicting its behavior within the framework of exogenously given, independent of the behavior of economic agents, variables, market structures, makes it difficult to consider the market and the firm as alternative and complementary ways of motivating and coordinating the activities of economic agents.

(In fact, the market and the firm can be represented as two poles of a continuum of types of contractual relations. Therefore, it is advisable to start studying with the definition of a contract and identifying its types. Further, in the first section, we will consider the principles for choosing transaction management mechanisms depending on the characteristics of the latter. In the second section, we will move on from the model of market management of transactions to the study of real markets and their types. In the third section, we examine the causes of the emergence of the firm and types of economic organizations. In the fourth, final section, we will get acquainted with other institutional agreements and determine the reasons for choosing discrete institutional alternatives.)

4.1. Contractual approach to the study of institutional agreements

Contract. The activities of economic agents can be considered

Like a network of obligations. Obligations are mutual and unilateral, people take them on voluntarily or under duress, and, finally, the parties themselves can monitor the fulfillment of obligations, or seek help from specialized bodies that resolve disputes and punish those who evade the implementation of agreements. Commitment is the essence of any contract, but not every obligation is a contract.

There are different approaches to defining a contract. In the traditional legal interpretation, a contract is defined as a voluntary agreement based on mutual promises, to which the parties can be forced in accordance with the rules of contract law. The key elements of this definition are the voluntariness and reciprocity of obligations, as well as the uniqueness of the enforcement mechanism.

Reciprocity of obligations makes it possible to distinguish between contracts and unilateral promises. Reciprocity and voluntariness, as a rule, is ensured by negotiations before concluding an agreement. In the process of negotiations, the parties can agree on their ideas about the rights and obligations reflected in the relevant clauses of the contract. Forcing an economic agent to perform actions not promised by him is illegal. The exception is non-contractual obligations related to the performance of the duties of an individual as a citizen of a certain country. There are also restrictions on forcing an individual to fulfill the obligations given in extreme conditions, for example, in a situation where his life was in danger

According to the classical theory of contracts, in order for a promise to become an obligation, three elements must be present: an offer (offer), acceptance of the offer or consent to the offer (acceptance) and recognition of the acceptance (the moment the contract is concluded). The parties may demand from each other the fulfillment of mutual, voluntarily given promises that have become obligations, resorting, if necessary, to one or another mechanism of coercion. At the same time, the range of coercive mechanisms in practice turns out to be wider than provided for in the framework of classical contract law.

Attention should also be paid to the categories of voluntariness and reciprocity. Can the master-slave relationship be viewed as a contract? What about signing an unfavorable contract at gunpoint? Does the principle of voluntariness still apply in this case? The answer will be negative if we reason within the framework of contract law. If we assume that a person always has a choice between the fulfillment of imposed conditions and death, then the questions should be answered in the affirmative. This idea of ​​voluntariness differs from the generally accepted one, however, it contains the necessary component of a conscious choice from at least two alternatives.

Reciprocity for a number of contracts is a characteristic that is difficult to define, since individuals may not enter into a contractual relationship at all, and

only an outside observer in this case determines that in their actions they were guided by some implicit "agreements", the terms of which were determined by the norms of the society, of which the counterparties were members. More on implicit contracts will be discussed below. On the this stage it should be noted that within the framework of such contractual relations, reciprocity in the full sense should not be expected at all, because even shared values ​​can be perceived differently, and the actions taken by the parties will be determined by the individual vision of the situation.

In the new institutional economic theory, the contract (agreement) is considered as a kind of institutional agreement. In terms of the latter, a contract can be defined as follows:

A contract is a set of rules that structure in space and time an exchange between two (or more) economic agents by determining the exchanged rights and obligations assumed and determining the mechanism for their observance

Without conflicting with the principles of reciprocity and voluntariness, as we have presented them, this definition suggests an extended approach to defining the rules structuring exchange relations. They may be a component of the contract itself, and not necessarily in a formalized form, be determined by reference to the current legislation, or be implied by the parties. In the latter case, we are talking about implicit contracts, the conclusion of which does not take place explicitly. The lack of a clear indication of the mechanism for enforcement of obligations also allows us to consider the whole spectrum from civil courts to public censure.

Contract types. From the accepted definition of a contract, it becomes obvious that one of the decisive conditions for concluding an agreement is the existence of a mechanism for forcing its implementation. The choice of the mechanism of coercion and the corresponding guarantor of the contract determines the method of resolving conflict situations that arise in the exchange process. This characteristic can be used as the basis for a typology of contracts based on the three-tier classification of the legal concepts of the contract by J. McNeil59, which is based on the division of contract law into classical, neoclassical and “relational”. (Note that the material considered in this subsection refers rather to Anglo-Saxon legal practice, based on the norms of case law).

As part of classical contract law the process of exchange can be facilitated by increasing the discreteness and "presentation" of agreements. Presentation is understood as the desire to describe the future situation as fully as possible from the standpoint of its current understanding. Such contractual practice implies that all relevant changes that require adaptation are described in advance, and the likelihood of various scenarios for the development of the situation is calculated. In fact, we are talking about the conclusion of a complete formalized contract.

59 Macneil, Ian. R. (1974), Reflection on Relational Contract, 41 541–546.

Formalized contracts are contracts in which the rules structuring the exchange are clearly stated (the subject of the agreement, the set of rights and obligations of counterparties, as well as the method of conflict resolution and the mechanism for forcing the fulfillment of obligations taken). An example of a formalized contract can be public accession agreements offered by one counterparty, usually a large one. legal entity other legal entities, as well as individuals (an agreement on opening a bank account, on the supply of electricity to the population, etc.).

The conclusion of a full contract assumes that all significant parameters of the agreement can be fixed in it, which in turn is possible only on the basis of accepting the assumption of unlimited rationality of counterparties. When all possible events occur, the contract must explicitly define how the parties should behave in a particular case, what costs to bear and what benefits to receive. It should be noted that in real life, drawing up such a contract seems almost impossible due to the lack of such a useful quality in individuals as perfect foresight.

The concept of ideal completeness in theory can be replaced by the concept of functional completeness, which means the possibility of completing the contract by a third party in case of disputes. If, as a result of completion, it is possible to accurately determine the intentions of counterparties, then such a contract is considered functionally complete. This requires that non-contractual parameters be verifiable for a third party called upon to resolve disputes.

In terms of the completeness of the contract, a number of essential characteristics of contractual relations can be distinguished. Firstly, the personal qualities of the participants in such a mutually agreed exchange do not affect its conditions, that is, the correspondence of the parties to each other is optional. Secondly, after carefully determining the essence of the agreement, the parties carrying out the exchange are primarily guided by legal norms and formalized terms of the contract. Thirdly, the means of overcoming difficulties with the implementation of the contract are precisely determined. The resolution of disputes arising between the parties to such agreements may take place in a civil court. Strictly speaking, the services of a third party in this case are necessary only to ensure the credibility of the threat of punishment, since the decision of the court is initially obvious. If it is clear that one of the counterparties has violated the terms of the contract, relations with him are immediately terminated, that is, the transaction is self-liquidating. That is why such contracts can be considered self-executing.

The classic contract is complete and formalized, it involves the termination of the agreement in the event of a conflict situation, the guarantor of its implementation is the state.

With an increase in the timing of the fulfillment of contractual obligations in the face of uncertainty, full presentability becomes prohibitively expensive, and, possibly, unfeasible. Not all upcoming events that require adaptation will be foreseen, and even the directions of adaptation at the stage of signing the contract are not obvious. If, under these conditions, the terms of the agreement between the autonomous participants in the transaction are rigidly fixed, then in the future this may lead to disputes about obtaining unreasonably high profits or, on the contrary, incurring additional costs.

In order not to completely abandon the implementation of such exchanges between independent counterparties, it is necessary to move to a new way of implementing contractual relations. Neoclassical model of contracting it is used mainly when concluding long-term contracts that inevitably contain gaps, that is, they are incomplete.

Let's list possible reasons incompleteness of the contract.

The terms of the contract can be unclear and ambiguous due to the limitations of the lexical apparatus.

Counterparties, due to bounded rationality, often overlook important variables related to contract performance, especially if they cannot easily assess the impact of these variables on contract performance.

In the overwhelming majority of cases, the parties operate under conditions of structural uncertainty, that is, they cannot know the probabilities of future events.

The discovery of all relevant information known to one of the parties or unknown to none of the parties to the contract leads to an increase in the benefits of one or both parties, but also increases the pre-contract transaction costs of information search and negotiation, on which rational agents tend to save.

The parties may find it more beneficial not to disclose information to each other, which will increase the individual gain of one of the counterparties.

The parties may deliberately enter into incomplete contracts, shifting the costs of completing the contract to a third party.

Accordingly, if we consider the incompleteness of the contract as an alternative to ideal completeness, then we can interpret it as a consequence of radical uncertainty, which consists in the impossibility of taking into account all future events and structuring relationships between economic agents on this basis. If taken for working definition functional completeness, then the contract will be incomplete or contain gaps when the fulfillment of the terms of the contract will leave unrealized the benefits of the exchange, taking into account information available to counterparties and judges at the time of the transaction.

To give the contract a certain flexibility, the parties use specialized mechanisms to fill gaps in the process of implementing the agreement. Under these conditions, the assistance of an independent arbitrator in resolving conflicts and evaluating the progress of the contract often takes precedence over judicial procedures. First, the arbitrator may use a number of rapid learning methods to examine a situation requiring expert judgment. Secondly, it provides for the continuity of relations between the parties and it is assumed that after the settlement of disputes, the transaction can be successfully completed. One of essential conditions the conclusion of agreements here becomes the trust of the parties to the dispute resolution mechanism.

The neoclassical contract is incomplete, it assumes the continuity of relations between the parties in the event of a conflict situation until the completion of the transaction. Contract Performance Guarantor - Third Party

As the length and complexity of contracts increases, the relevance of the parties to the agreement to each other becomes increasingly important. In conditions when the replacement of a partner becomes practically impossible, neoclassical methods of adaptation are being supplanted. "relational" in the extreme case, administrative. As O. Williamson notes, “contract relations acquire the properties of a mini-society with a wide range of norms, not limited

those that are directly related to the act of exchange and the processes accompanying it” 60.

With sufficiently close interaction, counterparties will prefer to resolve disputes among themselves without resorting to the help of a third party. This will be done for a number of reasons. First, resorting to an external arbitrator is likely to shake the parties' trust in each other. Secondly, with the increase in the complexity of the assets used and other characteristics of the transaction, even a qualified expert will not be able to understand all the nuances. Many variables related to the implementation of the exchange turn out to be unverifiable by a third party. Thirdly, the contracts concluded in such conditions are incomplete, with a large unformalized component; in their implementation, the parties are based not so much on the points written on paper, but on the experience of all previous relationships. Therefore, when resolving a dispute, a third party can only guess about the true intentions of the partners, and these guesses under the given conditions will most likely be wrong.

The relational contract is incomplete, it involves long-term cooperation of the parties. Guarantor of performance of the contract - one or both counterparties.

Characteristics of transactions. The choice of one or another type of contract by counterparties depends on the characteristics of the transactions being carried out. The first characteristic is the level of uncertainty. Indeterminacy itself is not an inherent attribute of a transaction; rather, it is a characteristic of the external environment. However, when considering the level of uncertainty as a parameter of transactions, it is necessary to identify, firstly, the main source of uncertainty, and, secondly, whether it lends itself to structuring, that is, whether economic agents can expect the occurrence of future events with some probability, or they act under conditions of extreme uncertainty.

The impossibility of assessing all future events is exacerbated by surprises associated with the reaction of partners to exogenous shocks, for example, changes in market conditions. The parties to the agreement are not only unable to make assumptions about the likelihood and direction of changes, but also to determine how opportunistically the counterparty will behave.

The second characteristic of transactions is the degree asset specificity, which are the subject of an agreement or resources the use of which is related to the performance of the contract.

A specific asset or resource is one that acquires special value within the given relationship.

This means that the degree of specificity is determined in accordance with the possibility of repurposing resources or assets for use in alternative purposes or in relations with other partners without loss of productive capacity.

60 Williamson O.I. (1996) St. Petersburg: Lenizdat, p. 132.

We will highlight non-specific, low-specific and idiosyncratic resources and assets. If the income from the use of a resource does not exceed the value of opportunity costs, then this resource can be considered as a resource of general purpose (non-specific). If the opportunity cost of using a resource is less than the income derived from it, but greater than zero, then this is a low-specific resource. Finally, if the opportunity cost is negligible or zero, then the resource becomes idiosyncratic.

For a better understanding, consider various forms asset specificity: location specificity, physical asset specificity, human asset specificity, target asset specificity.

Location specificity arises from the immobility of assets, due to the fact that commissioning or redeployment is associated with significant costs. Consequently, after the initial placement of such assets, the parties will maintain a bilateral exchange relationship throughout their entire life. An example is the location of related industries in close proximity, which reduces transportation costs and inventory storage costs. Transportation costs are also reduced when using specific means of delivering resources to consumers, such as railroad tracks, various pipelines and power transmission networks. Their redeployment is almost impossible.

The specificity of physical assets is due to the need to create specialized equipment to reduce production costs. Assets can be mobile in this case, but their physical features are such that they make it impossible to freely sell on the market, that is, assets become valuable precisely within the framework of these relationships. Examples are special tanks or wagons for the transport of goods with significant design features, or blanks for the production of specialized parts.

It is advisable to consider the specificity of human assets primarily in terms of the possibility of obtaining certain skills in the workplace, which are of high value specifically for this company. Occupation of certain positions, for example, a chief accountant or a head of a department, allows you to acquire the knowledge and experience necessary to carry out work in a particular position, and even when occupying the same position in another company, it will take time to adapt specific knowledge and skills to new conditions.

The specificity of target assets is the result of investment in production capacity general purpose, created with the prospect of selling a significant amount of the product produced with their help to a specific consumer. Investments in target assets involve, for example, the expansion of the main production facilities to ensure the fulfillment of orders of a particular buyer.

Assuming that the level of uncertainty is low, the use of specific assets often reduces the costs associated with the production of goods and the provision of services. However, investments in specific assets are potentially risky, as such assets cannot be transferred to use in other projects in the event of an interruption or early termination of the contract without compromising their economic value. Under conditions of radical uncertainty, the counterparty that created specific assets becomes a potential target for extortion. He may be required to agree to change the terms of the agreement to less favorable ones under the threat of termination of the contract, which will lead to a stranded investment. That is why in a situation where it is impossible to predict either the likelihood of adverse events or the behavior of the counterparty when adapting to them, certain contractual and organizational guarantees are created when investing in specific assets.

The use of specific resources and assets not only increases the complexity of contractual relationships, but also affects their duration by increasing the interdependence of counterparties.

The third characteristic that influences the choice of contract type is transaction frequency. In order for the costs of creating and maintaining complex mechanisms controls were justified, repeatability of transactions is necessary, in which there is a positive effect of scale. There are three levels of transaction frequency: one-time, random(or sporadic) and regular(or continuous).

So, in conditions of radical uncertainty, the choice of a mechanism for managing contractual relations will depend on the frequency of transactions and the degree of specificity of the resources used.

Transaction management mechanisms. When concluding a contract, the parties simultaneously determine the price and quantity of the exchanged good, the technology used (exchange or production), and guarantees as a means of protection against the opportunistic behavior of the counterparty (primarily in the form of extortion). The choice of this or that type of guarantee means the choice of a certain mechanism for managing contractual relations.

If, in order to complete a transaction, one of the counterparties needs to invest in specific assets (for example, to acquire unique equipment, to acquire unique skills), then he will require either guarantees of the continuity of relations, or establish some premium on the price of the goods for the risk. If such requirements are not understood, then the parties will have to use general-purpose assets, which can increase the value of the exchanged item. At the same time, with an irregular exchange of standard goods, the desire to create resource-intensive guarantees will lead to “unprofitable” transactions.

Performance guarantees should vary according to the nature of the transactions involved. First, they can be implemented in the revision of the system of incentives by coordinating the motivations of counterparties or ensuring the credibility of the threat of punishment in the form of payment of penalties or fines for early termination of the contract. Secondly, take the form of creating and using specialized governance structures to deal with conflict resolution (an example would be the use of an arbitration court instead of the usual judicial procedures). Thirdly, various mechanisms for ensuring the continuity of contractual relations (common ownership of assets, pledges, etc.) serve as a guarantee.

The creation of guarantees leads to a reduction not only in post-contract transaction costs (by minimizing the risk of opportunistic behavior and inefficient adaptation to changing market conditions). Pre-contract costs are also reduced, that is, there is a saving of resources, including cognitive abilities, directed to identifying relevant information. Counterparties do not need to draw up a comprehensive agreement if they have identified mechanisms for coping with unforeseen events. This approach allows us to analyze the contracting process in its entirety, taking into account that at each stage rational counterparties will strive to minimize the costs of transactions.

Improving the efficiency of contractual relations as a result of minimizing transaction costs involves the optimal matching of transactions that differ in their characteristics with management structures that are not the same in terms of the costs of their operation and the possibilities for ensuring the implementation of transactions.

O. Williamson highlights four types of contract management structures: market, tripartite, bilateral and unilateral61.

Market management most effective in the implementation of transactions that do not require investment in specific assets. In this case, the defense against opportunistic behavior is the ease of breaking off the relationship. If regular repetition of transactions is expected, then the parties, having analyzed their own experience, may decide to continue the relationship, or to change the partner with minimal costs. In random transactions, the benchmark in choosing a partner is his reputation in the market for this product. Under these conditions, prices play a dominant role in providing coordination, control and stimulation, which is typical for a competitive market.

An additional means of reducing the risk of opportunism is the threat of punishing an unscrupulous partner by imposing fines and other sanctions applied by the judiciary. To do this, at the pre-contract stage, it is necessary to carefully determine the essence of the agreement and the means of overcoming difficulties with its implementation, which is relatively easy with simple exchanges of standard goods. The only problem is to ensure the guaranteed application of sanctions to the violator, which is directly related to the function of the state as a guarantor of contracts.

The desire to conclude a comprehensive agreement on transactions using general-purpose resources that do not create interdependence of counterparties is typical for contracts considered in classical contract law. We found out earlier that the classical contract involves the implementation of transactions within the framework of the current legislation, which allows the parties to further save on the costs of drawing up and concluding a contract. Actually, if the emphasis is on legal norms and formal documents, then the function of a third party is to ensure the credibility of the threat of punishment and self-liquidation of insolvent transactions is possible, in which the correspondence of the parties to each other is not essential. It is these circumstances that make it possible to speak of a classical contract as a legal analogue of an impersonal market exchange.

Three way control necessary in the implementation of one-time transactions, the effectiveness of which is enhanced by the use of specific assets, which predetermines the importance of the continuity of relations. Reducing the threat of termination of the contract requires the search for other forms of preventing opportunistic behavior.

61 Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, "relational" contracting, St. Petersburg: Lenizdat, p.68.

The risk of opportunism also increases due to the fact that such transactions require, as a rule, the conclusion of complex long-term contracts, which, under conditions of radical uncertainty and limited rationality of individuals, inevitably turn out to be incomplete. Changes in the conditions under which a transaction takes place can significantly affect returns on specific assets, causing unforeseen distributional effects. In this regard, a strict agreement at the pre-contract stage of the actions of counterparties will lead to serious

The deal will not go through until both parties begin to trust the dispute resolution mechanism. Going to court in the event of a conflict will entail the interruption of interaction, and the creation of structures specialized for these relations for making consistent adaptive decisions will be ineffective due to the unrecoverable costs of their operation in the implementation of one-time transactions. To solve problems, the parties should turn to the help of an expert arbitrator, who can flexibly fill in the gaps in the contract in each specific case, based on the principles of effective transaction implementation and dispute resolution with the continuity of the relationship between the parties. The described situation corresponds to the neoclassical contract law considered earlier.

For the implementation of regularly recurring transactions that require investment in specific assets, the development of specialized management structures is justified: bilateral, which preserves the autonomy of the participants in the transaction, and joint management, involving the transfer of transactions from the market to the boundaries of the firm, where they are implemented on the basis of administrative decisions. Under these conditions, the value of the correspondence of the interacting parties to each other becomes dominant and the termination of transactions due to the emergence of a dispute will be associated with prohibitively high costs.

In contrast to the previously discussed governance structures, in which the initial agreement remains the starting point for effective adaptation to unforeseen events, now the parties are guided by the experience of interaction accumulated over the entire period of their relationship, which predetermines the primacy of informal agreements over formalized contract clauses. These features are characteristic of the relational contracting described earlier, in which neither the courts, nor even the specialized mechanism for resolving disputes with the help of an arbitrator, provide effective adaptation. Hence the need for a system of private settlement of conflicts.

The more specific the assets used, the less likely it is that economies of scale will be realized through intercompany trading. The choice of how the transaction is organized in this case will depend solely on the comparative advantages of management structures in adapting agreements to unforeseen events, taking into account the reduction in the risk of opportunistic behavior. Let us note that the need for the continuity of relations between the parties and their correspondence to each other is in itself a defense against opportunism. However, in the course of negotiations that permeate the entire contract process in the choice of bilateral management, the withdrawal of quasi-rent may be more valuable for some individuals than sustainable cooperation. Usually some way of working out acceptable limits is required.

the ability to adapt to unforeseen circumstances, when decision-making occurs on the basis of a mechanism that both parties trust. To increase the credibility of the obligations of the parties and reduce the risk of opportunistic behavior, certain guarantees should be provided in the contract.

With bilateral governance, an effective form of guarantee is the creation of an institution of "hostages". The mechanism for providing collateral is as follows: one of the counterparties invests in specific assets and offers products at a price that does not include a risk premium, but only if the partner who initiates the rupture of relations undertakes to pay a certain amount (makes an advance payment) that compensates costs to the injured party. Pledges allow not only to prevent the opportunistic behavior of counterparties, but also to weed out unscrupulous partners at the pre-contract stage. A necessary condition is the creation of mechanisms to prevent the expropriation of collateral.

In joint management, common ownership of the assets acts as a guarantee. The advantage of this governance structure is the ability to make consistent, adaptive decisions without the need to take into account, revise or supplement agreements between counterparties. Adaptation to changing market conditions occurs by following the instructions of the owner of the company. However, one should not forget about the problem of the relationship between the guarantor and the executor, which arises when using hierarchical management structures (more on this in the following sections).

Forms effective management transactions depending on the specificity of assets and the frequency of transactions can be presented in Table 4.1.

Table 4.1. Forms of effective transaction management

^hAssets Transactions ^\

Non-specific

Low specific

Ideosyncratic

Random

Market management (classic contract)

Trilateral control (neoclassical contract)

Tripartite/bipartite governance (neoclassical/relational contract)

Regular

Market management (classic contract)

Bilateral control (relational contract)

Unilateral control (relational contract)

Despite the fact that the table does not reflect the influence of the uncertainty factor on the choice of a mechanism for managing contractual relations, changing its level has a significant impact on the effectiveness of adaptation to unpredictability.

seen conditions. With an increase in the level of uncertainty, the parties either create additional guarantees of the continuity of relations, that is, they choose a mechanism for managing contractual relations, which is more based on informal conditions for resolving conflict situations, or prefer a technology that involves the use of resources and general-purpose assets, in which the continuity of relations and compliance sides to each other are not such essential characteristics.

In studying the various types of contracts in this section, we assumed that the parties enter into them consciously and voluntarily, explicitly declaring their intentions.

Explicit (explicit) is a contract, the conclusion of which occurs explicitly in oral or written form. Both contractors express their willingness to cooperate in one way or another.

An implicit (implicit) contract is a tacit understanding and recognition of obligations by the parties, which is not supported by legal or external protection.

Strictly speaking, in the case of implicit contracts, the very fact of the parties entering into contractual relations can most often be recorded only by an outside observer who reconstructs the “agreement” based on data on the behavior of “counterparties”.

Implicit contracts can in turn be divided into social and conventional.

Analysis of the first type of implicit contracts involves knowledge of supra-constitutional norms, traditions, customs of a certain society, and rules business etiquette accepted in various countries, among members of professional communities. The parties entering into such contractual relations can only imply that any obligations have been given, based on ideas about the norms existing in this society. On the one hand, such agreements are the most effective, minimizing the costs of concluding a contract. Implicit contracts are self-executing and therefore savings in enforcement costs are possible. The risk of post-contract opportunistic behavior is also minimal, since the fulfillment of obligations is guaranteed by the fact that counterparties belong to the same social (sometimes professional) group. On the other hand, the same circumstances determine the limited possibility of using implicit contracts, as well as the difficulty of their analysis. Only members of the community who have the same understanding of social norms and business etiquette, whether it be the need to pay off debts or come to work on time, can interpret the relationship in terms of an implicit contract and fulfill it in the way that the opposite party expects. In fact, we can talk here about unilateral commitments. Unilateral obligations are considered within the framework of the theory of social contracts (more on this can be found in the relevant section in the chapter on the state).

Conventional implicit contracts, as a rule, are based on some initial contract concluded explicitly. Further, as close cooperation develops, the parties are less focused on the formalized part of the agreement, moving to the limit on the implementation of actions, the logic of which is based on the cumulative experience of previous interaction. Of course, the behavior of counterparties is also influenced by social norms and concepts of professional ethics, but for the purposes of the study it may be useful to highlight aspects of behavior due to relationships with a particular partner, since factors such as reputation, continuity of relationships, credibility of obligations can be of particular value precisely within this framework. contract. Analysis of the implicit components of contracts in general view practically impossible, this requires a focused study of certain contractual relationships.

The table below shows the interaction of such characteristics of the contract as completeness, formality and implicitness. If the existence of a contract with certain parameters is possible, then the corresponding column is “+”, if not, then “-”.

Table 4.2. Typology of contracts

Contract types

Formalized

Informalized

Formalized

Informalized

Incomplete

4.2. The Market as an Institutional Agreement

The types of contractual relations presented above create a general outline of the study, within which the choice of one or another transaction management mechanism takes place in order to minimize transaction and transformation costs. At the same time, it is implicitly assumed that the most significant are the costs of opportunistic behavior in the form of extortion, which increase as the degree of asset specificity increases.

According to O. Williamson, the market mechanism for managing contractual relations involves the exchange of independent contractors, whose guarantees against opportunism are the ease of terminating the contract and / or applying to the court by the injured party. However, this approach does not provide an opportunity to explore the market phenomenon to a sufficient extent. In particular, questions remain unanswered about the reasons for the diversity of existing market structures, as well as about the role of institutions and organizations that maintain exchange relations in conditions of low asset specificity. In the next subsection, we will answer the second question and then return to the first.

Market. In a first approximation, the market can be defined as a special type of exchange. Its distinguishing feature is the equality of sellers and buyers in the choice of counterparty, subject and proportions of exchange. Taking into account the characteristics of the market mechanism for managing transactions, the definition is as follows:

The market is a set of symmetrical selective exchanges, the proportions of which are regulated by the price mechanism.

In order to move from considering the model of the market mechanism of governance to the study of real markets, it is necessary to include in the analysis a number of costs that accompany this type of exchange relations.

The costs of carrying out a market exchange consist of the costs of acquiring information about the partner and the product offered by him and the costs of creating mechanisms to prevent and suppress the opportunistic behavior of the counterparty. The main form of manifestation of opportunism in these conditions is the provision of low-quality goods and services and the untimely reimbursement of the costs of their production. The acquisition of objects of exchange is associated

with the expenditure of limited monetary and non-monetary resources, therefore, even after the rupture of relations, the injured party needs compensation for the damage incurred. The existence of a mechanism for compelling the payment of compensation in this case has the features of a public good, since it leads to a revision of the system of incentives for an unscrupulous counterparty.

Let us consider in more detail the nature of exchange costs. Let's start with the costs that have to be borne at the pre-contract stage: they are associated with the need to find a bona fide partner and evaluate (measure) the characteristics of the goods offered by him (and not only quality, but also legal ones). Theoretically, these costs can be avoided, however, in this case, the risk of opportunistic behavior of the counterparty in the course of the agreement increases.

The best criterion for evaluating the integrity of a partner is one's own experience, but market exchange often involves the interaction of individuals who did not know each other before. Under these conditions, the acquisition of information about a potential counterparty may present a certain difficulty: finding out additional information requires costs that increase in the absence of specialized channels for transmitting reliable information.

Valuation costs arise in connection with the existence of various properties of goods and services that have a different impact on the utility received by an individual in the process of consuming a good. This means that when we buy a pie from the subway, we pay for the number of calories needed to satisfy our hunger, the quality of the dough and toppings, which affects our overall level of enjoyment, and possibly also our well-being. Among other characteristics that determine the value of this purchase for us, one can single out the convenient location of the seller, the freshness of the pie, the presence of packaging or napkins. The seller also, selling us a pie, hopes to receive in return the monetary units of that era and the country in which the exchange is carried out, and preferably not fake ones. Thus, the value of the act of exchange for its participants lies in the value of the various properties that are brought together by an object or service. We can immediately detect some properties (presence of packaging) visually, others - the freshness and temperature of the product with the permission of the seller can also be found out, however, to recognize these studied characteristics, it may be necessary to spend additional resources. The situation is even more difficult with properties that can be assessed only by consuming a product or service.

The transfer of the object of exchange from one counterparty to another may be associated with prohibitively high costs of unambiguous determination useful properties exchanged good, since there are differences in individual assessment of utility and difficulty in communicating information about some essential characteristics.

Other components of valuation costs are a consequence of the bounded rationality of individuals and their propensity for opportunism. Even in the presence of complete information, the limited cognitive abilities of the counterparty lead to the impossibility of assessing and taking into account all relevant data. In addition, even if the transfer of data is not particularly difficult, one or both counterparties may be interested in preserving

information asymmetry, seeking to obtain additional benefits from hiding useful information.

The value of a good for an individual consists not only in the presence of useful properties, but also in the possibility of extracting them, which is sometimes limited by other individuals. The value of the object of exchange is reduced in conditions of insufficient specification and protection of rights, or their distribution in such a way that counterparties cannot fully consume the useful properties of the goods and services provided. D. North notes that rights are easier to specify if the usefulness of the good is easy to assess and if its change occurs in a predictable direction62. However, if the flow of extracted utility can be influenced by the parties of exchange, market conditions or parameters of the institutional environment, the definition and protection of the rights of counterparties becomes problematic, and additional resources are required to establish whether the benefit actually provides the expected utility. Under these conditions, the parties may try to "appropriate some of the disputed utility." Thus, the insufficient specification of powers increases the likelihood of opportunistic behavior in the process of implementing the agreement.

Rational individuals will behave opportunistically whenever the benefits of such behavior outweigh the benefits of fair trade. Under conditions of market exchange, the probability of manifestation of opportunism will be the lower, the more complete the contract can be drawn up by counterparties. At the same time, the non-zero costs of evaluating the characteristics of a partner and the product he offers do not allow one to fully specify all the conditions of the exchange. In this situation, it becomes necessary to create incentives for counterparties to fulfill their obligations. A feature of market exchange is that, due to the irregularity of transactions and the non-specificity of goods and assets, the parties do not always consider it appropriate to create guarantees to prevent opportunism, thereby increasing the likelihood of its occurrence.

With a prohibitively high level of transaction costs associated with the implementation of a market exchange, the latter may not take place. In fact, we are talking about an excessively high level of uncertainty, which the parties are unwilling or unable to reduce. Under these conditions, formal and informal rules and institutions, as well as organizations that reduce information asymmetries and enforce agreements, help to reduce the level of uncertainty and thus the costs of exchange.

As examples of rules and institutions that reduce the cost of exchange, we note the laws on the protection of trademarks and intellectual property, consumer protection, advertising, regulations organizations that control the functioning of industry markets, the rules and customs of trade that are characteristic of various market formations.

Institutions structure counterparty relationships by creating an additional system of restrictions. They vary in complexity and must match the characteristics of the exchange. From this point of view market can be redefined

62 North D. (1997), M.: Nachala, p.50.

how a set of institutions that structure exchange relations by creating a system of restrictions.

At the same time, we should not forget that the rules perform not only a coordinating, but also a distributive function, which is the basis for the existence of inefficient institutions that increase the level of uncertainty and complicate the process of interaction between counterparties (we will recall this in the section devoted to the analysis of the emergence of firms).

The degree of complexity of economic exchange depends on the level of division of labor between individuals. A high level of specialization implies an increase in the variety of useful properties of objects of exchange and an increase in labor productivity, but at the same time, the costs of market transactions increase. In conditions of uncertainty and in the absence of additional guarantees, the parties to a decentralized non-personalized market exchange are forced to include a risk premium in the cost of goods and services, the value of which depends on the likelihood of opportunistic behavior. For many centuries, this premium was so high that it prevented the development of complex forms of exchange and thus limited economic growth.

The higher the level of division of labor, the more important is the stability and consistency of institutions, as well as the reliability of organizations that allow individuals to enter into complex contractual relationships, minimizing the costs associated with uncertainty about the characteristics of the objects of exchange and the implementation of the terms of the agreement.

The institutions that structure market exchanges are a supplement to (and in some cases a substitute for) the guarantees provided by the parties as part of more complex contract management mechanisms. At the same time, as the parameters of exchange become more complex and the role of formal rules strengthens, more and more expenses are required for the maintenance and functioning of developed institutions. The next section offers a brief historical overview to trace the development of the rules and institutions that structure market exchange.

Personalized and non-personalized exchange. At the dawn of human development, a type of exchange dominated, characterized by personified the relationship of the parties. Its distinguishing features were repetition, cultural homogeneity (that is, the presence and awareness of all participants in the exchange of common values) and the absence of the need for control and coercion by third parties. The latter was possible for a number of reasons. First, at this stage of production and exchange, goods and services were relatively simple, which reduced the cost of assessing their useful properties. Secondly, when the exchange is repeated, the need to maintain the reputation and the fear of the counterparty's response becomes an important mechanism for forcing the fulfillment of the terms of the agreement. Thirdly, an additional motivation for honest behavior is the presence of a common set of values.

In the anthropological literature, one can find evidence that the close social community of tribe members in the absence of a state and written

rules gives rise to very stable informal structures. Order is the result of a close co-existence, thanks to which people understand each other well. Deviation from the norms of behavior is not allowed, because it poses a very serious threat to the stability and security of the whole society.

To the primitive social institutions include blood ties, distribution of rights and obligations based on position in the family, donation as the main mode of exchange, severe responsibility for damage caused to others, generosity and honor as highly respected ethical norms, the principle of collective guilt.

Thus, initially the main mechanisms for ensuring compliance with agreements were the self-identification of community members, their sharing of the common goal of existence - the survival and stability of the team, as well as the credibility of the threat of punishment, due to the observability and repeatability of the actions of individuals.

Over time, specialization and division of labor develop. The exchange is becoming more diverse and the number of transactions is growing. Transactions within one community cease to meet the needs of its members, and it becomes difficult to establish sustainable relationships with each partner. The second type of exchange becomes more efficient - non-personalized, within which the importance of reputation and the presence of common values ​​is reduced. The old mechanisms for ensuring the implementation of agreements cease to satisfy the participants in the exchange; moreover, they become an obstacle to the implementation of new types of transactions. Blood ties, pledges, hostage exchanges, commercial codes of conduct shared within the same social group no longer contribute to the development of exchange relations. They are replaced by complex rituals and religious prescriptions that serve as restrictions for partners. The development of new institutions has enabled the expansion of the market and the realization of the benefits of more complex production and exchange.

Further risk reduction in conditions of non-personalized exchange is facilitated by the emergence of intermediaries who establish private rules and monitor their implementation. During the Middle Ages, workshops arose, the charters of which clearly regulated the methods of manufacturing certain goods. Merchants are united in merchant guilds, and act according to accepted codes. In addition, special places for trade are being created, the exchange for which takes place in accordance with clearly established rules. Unlike the terms of a personalized exchange, now it is not so much the reputation of each counterparty that is important, but intermediaries who are guarantors of the quality of goods and services and the fulfillment of other terms of agreements.

In medieval England, fairs and markets were organized by private individuals who received royal privilege. The organizers not only provided the facilities necessary for the trade, but were also responsible for security and conflict resolution.

Exchanges have become a more developed form of centralized market exchange. They are usually organized by groups of merchants, owners or tenants of premises within which agreements are made. All exchanges regulate in detail the activities of those who trade on their sites, including time,

entered for transactions, possible objects of trade, terms of agreements, responsibility of the parties. Dispute resolution mechanisms are also defined and sanctions are applied against those who violate internal rules. R. Coase notes that it is the exchanges, which economists often refer to as an example of a perfectly competitive market, that ensure the exchange of detailed regulation of transactions63.

At the same time, the relative importance of centralized trading, carried out on the principles of auction, has decreased with the growth in the number of wholesale and retail stores. retail. Under these conditions, the costs of establishing and maintaining a private system of legal norms turn out to be prohibitively high.

There is only one economic agent that has sufficient potential for violence to ensure the threat of punishment for failure to fulfill obligations in a decentralized non-personalized exchange. Therefore, activities in decentralized markets are regulated by the legal system of the state.

Increasing societal complexity is increasing the returns to formalizing constraints, and technological change is helping to reduce the cost of valuation by introducing standardized weights and measures. The emergence of price lists and new, more advanced methods of auditing and accounting make it less costly to obtain information and control over transactions.

So, the deepening of the division of labor, in addition to increasing productivity and the possibility of better satisfaction of consumers, entails an increase in transaction costs that accompany the implementation of transactions within the framework of non-personalized exchange. The effectiveness of the implementation of transactions depends on the possibility of obtaining reliable information about the partner, reducing the costs of assessing the useful properties of objects of exchange, as well as the costs of ensuring compliance with the terms of agreements. To this end, rules, institutions and organizations are being created and emerging to help reduce information asymmetries and reduce the likelihood of opportunistic behavior. Changing the rules causes the emergence of new types of market structures.

Typology of markets. The classification of markets in economic theory can be made according to many criteria. According to the subject of exchange, product markets and resource markets (including labor, capital, etc.) are distinguished. According to the number of sellers and buyers and the presence of entry-exit barriers, it is possible to distinguish markets of perfect competition, monopoly, oligopoly, monopolistic competition). This division is well known from the courses of microeconomics and the theory of industrial markets. The classification of markets within the framework of the new institutional economic theory should be carried out on the basis of the variability of the exchange rules that determine the set of rights that buyers and sellers have in various market structures.

In this subsection, we will consider the rules for conducting transactions in the markets of the final product. The narrow focus of the study allows more

63 Coase R. (1993), Firm, market and law, M.: Delo, p.11.

fully identify the comparative advantages and disadvantages of different types of market.

Considering the historical evolution of the process of market exchange, we can distinguish five types of markets: an open public market, a craft shop, a fair, an exchange, and a general store. It was noted above that these market structures arose sequentially, as a reaction to the complication of exchange parameters associated with a deepening division of labor. At the same time, we observe the simultaneous existence of all five types of markets. This means that each of them has certain advantages in reducing the transaction costs of the exchange.

Open public market "Spilled on asphalt." These are grandmothers near the metro, selling bread and cigarettes, peddlers of soda in parks. The main convenience for buyers is related to availability: the seller himself is looking for whom to offer the product to. Accordingly, the costs of finding a partner to make an exchange are reduced. This type of market offers the possibility of bargaining and setting prices at a very low level, since the trader does not pay rent, does not purchase specialized equipment, and, regrettably, is able to avoid paying taxes. This leads to a decrease in the role of the state as a guarantor of the exchange for this market. Accordingly, the costs of specification and protection of property rights increase, and in the conditions of bargaining, the costs of negotiations. The only defense against opportunistic seller behavior in such markets is the ease with which the relationship can be broken. Having bought a low-quality product once, you will bypass the person who offered it. This imposes a limit on the range of items of exchange on the open public market. Goods must be either researchable (to reduce valuation costs) or of low value (because it can be difficult to obtain compensation). The probability of buying a quality product increases if you have to pay for a place (at least the police or illegal structures). In this case, the seller, who values ​​his position, becomes a guarantor of quality.

In a market whose main participants are sellers craft shops, the costs of searching for alternatives are significantly higher: you need to go around several points in order to find the product of interest. At the same time, due to the presence of a certain premises in which trade takes place, the likelihood of opportunism in the form of a sale is reduced. low-quality goods. The guarantor of quality is the seller himself, who values ​​his reputation, as well as the state, which collects taxes from him and has the opportunity to carry out periodic checks. Additional guarantees may be provided by a third party in the formation of professional guilds and associations. The combination of the functions of the seller and the manufacturer also allows you to reduce the price of goods, including as a result of bargaining. This type of market has a comparative advantage in servicing exchanges for unique goods (such as art) or goods requiring pre-sales and after-sales services. The seller in the craft shop can fulfill the orders of buyers, and also bears full responsibility for the sale of low-quality goods. Over time, this type of market may lose the features of an impersonal, non-personalized exchange. This will happen the sooner, the less the characteristics of the object of exchange can be assessed by an external guarantor.

Fair - the third type of market, in which the bargaining of the seller and the buyer is appropriate, which increases the costs of negotiations and the conclusion of a contract. At the same time, in this market, the costs of finding alternatives are relatively low, since at a certain time, in a certain place, sellers of various goods gather. If the fairs function constantly, then a structure similar to the widespread wholesale and retail markets. A distinctive feature of fairs is the presence of certain rules of trade, the implementation of which is obliged to monitor the organizer. As a rule, it provides protection for buyers and sellers and can be, to some extent, a guarantor of the quality of the exhibited goods. You have to pay for these services, but it is clear to whom and how much, which reduces the costs of specification and protection of the rights of market participants. Thus, the reputation of the organizer of the fair can have a significant impact on the range of goods purchased (in a dubious place it will be the same as in an open public market). An additional protection against opportunism is the ease of changing a partner (one of the many sellers of standard goods), as well as state guarantees (at the current stage of development of society). Special mention should be made of fairs of homogeneous goods (for example, bookstores) where manufacturers and buyers have the opportunity to meet and discuss individually the terms of the contract.

Exchange represents a more complex market structure that allows to reduce almost all types of transaction costs, thanks to the development of standard bargaining procedures. On the exchange, it is possible to trade goods that are not yet available (for example, to conclude contracts for the supply of future wheat crops). This is due to the simultaneous existence of several exchange guarantors. Exchange commissions set clear, well-known rules for all buyers and sellers and penalize those who fail to comply with them. The most effective way to prevent and stop opportunistic behavior is to deny access to the site. The regulation even applies to the price level (with a large amplitude, trading may be suspended). At present, the role of the state as a guarantor of exchanges on the stock exchange is no less important. Specially created bodies carry out licensing of professional market participants, which is an additional guarantee of the quality of exchange services. The use of the services of specialized intermediaries, as well as high technology, can significantly increase the efficiency of trade. At the same time, the maximum anonymity of the exchange determines the comparative advantages of this type of market when trading in large quantities of standardized goods.

V department store there are also clearly fixed rules of trade, the main of which should be recognized as the absence of the possibility of bargaining, which reduces the costs of negotiating and concluding contracts to a minimum. A wide range of products offered reduces the cost of finding alternatives. As a rule, buyers get an additional opportunity to evaluate the consumer qualities of goods. The management of the supermarket, to a greater extent than the organizers of the fair, is responsible for the quality of the goods sold. That is why the buyer often focuses on the reputation of the store than on the reputation of individual sellers, which makes the management stimulate the conscientious work of the latter. Within this type of market, state guarantees are also strong, since a functionally complete contract in the form of a check is concluded between the buyer and the seller. At the same

time, if the rules for filing claims are not clearly developed, then misunderstandings may arise for complex items of exchange: the seller is responsible for the goods only within his competence.

Thus, the simultaneous existence of all five types of markets is associated with the presence of comparative advantages in reducing transaction costs, which depend on the rules for conducting exchanges. This also determines the range of items of exchange traded on certain markets.

Of particular note is the following circumstance: only an open public market fully fits the definition of a market mechanism for managing transactions according to O. Williamson. If all markets were like this, then we would have to limit ourselves to the consumption of standard, easily researched, low-value goods. To expand the range of items of exchange, counterparties use additional guarantees, which leads to the use of not only classical, but also neoclassical and even relational contracts on the market. In fact, what we call the market in everyday practice, in theory, can be attributed rather to hybrid institutional agreements (more on this phenomenon in the final section of the chapter).

4.3. The firm as an institutional arrangement

Despite the wide variety of market structures, as well as rules, institutions and organizations that reduce the costs of obtaining information, control and enforcement of contractual obligations, in the economy, in addition to autonomous individuals, their associations, namely firms, are included in the market exchange. Applying consistently the principles of neo-constitutional analysis, we must recognize that a decisive prerequisite for the existence of firms is that they have comparative advantages in certain activities. In this section, we have to find out why firms arise and what are the reasons that determine the size and scope of their activities.

Firm. In the new institutional economic theory, the firm is not seen as an indivisible integrity within itself, but as a set of individuals united to achieve a certain goal, but at the same time having their own utility function, the maximization of which affects their behavior.

If rational individuals combine to produce goods or services, then they see certain benefits in this. Thus, answering the question about the reasons for the existence of a firm involves identifying its advantages over decentralized market exchange. In fact, we are talking about finding out the reasons for the unsatisfactory functioning of market institutions, including the price mechanism, in the process of providing individuals with complete, reliable, timely information, coordinating their activities, and forcing them to fulfill contractual obligations. All of these functions, in the long run, facilitate the process of adaptation of economic agencies.

to the changing parameters of the institutional environment and economic conjuncture.

Let us single out two types of institutions and organizations supporting them that facilitate the implementation of market exchange, respectively, at the pre-contract and post-contract stages. Before concluding an agreement, the parties, as a rule, spend resources on finding a partner, evaluating the useful properties of goods and services, and negotiating. During the implementation of the agreement, it is necessary to control the activities of counterparties in order to identify and suppress opportunistic behavior.

In developed economic system There are organizations that sell or provide free necessary information, thus contributing to the reduction of information asymmetry. However, we are not talking about the elimination of costs: they decrease as a result of specialization, but they have to be borne either by contractors or third parties. The latter condition is more conducive to the implementation of the exchange. In a number of cases, the asymmetry of information cannot be overcome, since opportunistic individuals will provide deliberately false information. If economic agents are interested in disseminating information about themselves, then they have to spend additional resources on creating reliable signals, which are not always directly related to increased productivity.

As the characteristics of the objects of exchange become more complex, counterparties have to spend more and more resources on negotiating and concluding agreements. Although there are institutions and organizations on the market that make it possible to reduce these costs as well (for example, commodity and raw material exchanges where internal regulations are developed), the costs are borne by both exchange participants and third parties. Changes in market conditions may require additional negotiations. In addition to creating conditions for the manifestation of opportunism, the negotiation process involves an increase in costs when re-negotiating the terms of the agreement. Moreover, costs cannot be avoided even when carrying out the simplest acts of exchange that do not require long-term cooperation of the parties: after the termination of relations, it is necessary to spend resources on finding a new partner.

The use of market contracting assumes that the detection of a violation of the agreement, as well as enforcement of obligations undertaken, is carried out by a civil court. It is the courts, which are part of the state system with the greatest potential for violence, that ensure the credibility of the threat of punishment. The specialization of a number of organizations in the functions of control and coercion in this case also leads to a reduction in transaction costs and their distribution between the parties to the agreement and a third party.

At the same time, one important point should be made: the organizations that support institutions and create favorable conditions for exchange are composed of individuals with limited cognitive abilities and their own utility functions, the maximization of which may involve the pursuit of self-interest using cunning. Moreover, individuals who take part in the creation and dissemination of formal rules are also most often concerned about their own benefits, which is the main feature.

the reason for the emergence and existence of normative and legislative acts that do not contribute to improving efficiency. The functioning of the judicial system can serve as the most striking example of the imperfection of institutions and organizations, one of whose functions is to reduce the costs of market exchange.

With an increase in the costs of assessing the characteristics of objects of exchange, determining the rights to the flow of income from the sale in terms of the division of labor, as well as increasing the specificity of the equipment used in the production process, the likelihood of opportunistic behavior of counterparties increases. The problem is exacerbated by the fact that organizations created to reduce costs are incompetent in resolving disputes that arise between counterparties.

The inefficiency of market institutions leads to an increase in the level of uncertainty. Under these conditions, according to the provisions of the new institutional economic theory, one should either abandon the advantages of the division of labor, or use other mechanisms for managing contractual relations. The reality that surrounds us indicates that preference is given to specialization and a variety of ways to satisfy needs. However, rational economic agents try to reduce the costs associated with non-personalized market exchange. There are two ways to do this: try to draw up a comprehensive agreement or move to use other mechanisms for coordinating production and resolving conflict situations.

The choice of the first option involves the specification of the behavior of each counterparty in the implementation of all possible events. Two circumstances prevent its use: firstly, the costs of reducing the asymmetry of information about the quality of goods, the characteristics of the partner and the terms of the transaction, which are inevitable when drawing up a full contract, can turn out to be prohibitively high, and secondly, the imperfection of foresight does not allow developing schemes for effective adaptation to change environment. Under these conditions, the parties will have to enter into many short-term contracts or often negotiate the terms of a long-term contract. The inefficiency of such actions increases with an increase in the frequency and duration of cooperation, as well as the need for rapid decision-making in response to the implementation of many exogenous and endogenous shocks. In addition, in the event of a failure in the negotiation process leading to a break in relations, the party that has invested in transaction-specific assets is at risk. The best safeguard against the manifestation of opportunistic behavior in the form of blackmail and extortion is the joint management of specific assets. In essence, this means the creation of a single firm.

A firm is a set of asymmetric non-selective exchanges in which the coordination of the activities of individuals is carried out through commands.

A distinctive feature of the firm is the displacement of the price mechanism as a means of coordinating the activities of individuals. Intra-company management is carried out with the help of orders to the executors-owners of human assets and the redeployment of capital assets in accordance with the orders

decision makers. Under these conditions, it is easier for resource owners to adapt to exogenous shocks, since negotiations are no longer required to coordinate activities. The transfer of decision-making power to an individual or a separate body makes it possible to realize the benefits of specialization in asset management: not all owners are good entrepreneurs at the same time. Voluntary renunciation of a number of powers is compensated in a predetermined way. Fixing the amount paid for the use of each factor of production enables their owners, who are not prone to risk, to shift the burden onto the owner of the firm.

Long-term intercompany relationships also help to reduce information asymmetry: firstly, in the process of interaction, many information is disclosed automatically, secondly, internal audit data, as a rule, turns out to be more reliable than information received about an independent partner, and thirdly, internal control only the result of the activity, but also the process of completing the task. The information received may turn out to be difficult to verify by a third party, therefore, counterparties also try to resolve conflict situations within the company, resorting to the help of independent experts and civil courts only as a last resort.

Thus, the transition to unified management provides counterparties with a number of advantages. This raises two interrelated questions: why all economic activity is not coordinated in this way, and what defines the boundaries of the firm.

To answer these questions, it is necessary to recall again the basic premises of the new institutional economics: the bounded rationality of individuals and their propensity for opportunism.

In conditions where the performers obey orders, we will be primarily interested in the limited rationality of the entrepreneur-guarantor. As the firm expands, diversifies production, and increases the volume of ongoing transactions with the external environment, the entrepreneur may not be able to direct the use of factors of production in the best possible way. The actions of the owner of the company will be rational, but in the conditions of incomplete information and imperfect cognitive abilities, he may not be able to make the best decision.

To develop tactical and strategic principles the functioning of the firm is greatly influenced by information coming from the lower levels of the hierarchy. In the process of passing through them, information can be intentionally or unintentionally distorted. The deliberate provision of false information is one of the forms of opportunism that cannot be eliminated in the transition to unified management. The degree of its manifestation depends on the interest of workers and employees in the final result of production and on the effectiveness of internal audit.

When organizing a firm, an entrepreneur pursues certain goals determined by the parameters of his utility function. Resource owners also tend to maximize their own utility functions whenever possible. If the goals of the guarantor and the executor do not coincide, there is a possibility of manifestation of opportunistic behavior in the form of shirking. Opportunity

manifestations of this type of opportunism arises due to the availability of private information about the level of efforts of the counterparty in the process of fulfilling contractual obligations and imperfect foresight of future events by individuals. Since the guarantor's profit is influenced not only by the efforts of the executor, but also by market conditions, it can be difficult to assess whether the guarantor was hardworking enough in the period under review. To prevent or suppress opportunistic actions of workers and employees, the owner of the company can create a system for monitoring and monitoring the performance of tasks, or try to agree on motivations at the pre-contract stage.

Relatively effective control can be achieved by performing mechanical work. As tasks become more complex and the role of the thought process grows, it becomes difficult to assess the efforts made and the degree of adequacy of the decisions made. The higher the position of the individual in the hierarchy, the greater the freedom of his actions, and the stronger influence provided by him, to determine the goals of the functioning of the company. The problem is exacerbated as the firm grows: in large companies, the scale of decisions made and the degree of risk are so great that it is effective to separate the functions of ownership and management. Even the use of an expensive control and monitoring system does not fully reveal private information about the performer.

Under these conditions, it may be preferable to create an incentive system that prevents the occurrence of opportunistic behavior in the form of shirking by adjusting the parameters of the performer's utility function. The optimal result can be achieved by creating a relationship between the remuneration paid and a change in some parameter that is significant for the guarantor. However, in this case, one has to abandon the effective distribution of risk in the system of relations. A compromise solution is the payment of a fixed part of the remuneration and the determination of a variable component with a certain coefficient, which certainly reduces the stimulating effect.

Thus, when creating a firm, along with a decrease in some types of transaction costs, there is an increase in others. The firm will expand until the cost of arranging one additional transaction within the firm is equal to the cost of arranging the same transaction through an exchange on the open market, or with the cost of arranging it by another firm.

The contractual nature of the firm. The main purpose of this section is to deepen the understanding of the phenomenon of the firm. Looking at the firm as a network of contracts allows one to analyze the benefits of reducing the number of contracts and giving one of the counterparties the control over the others.

Let's start with the simplest case: suppose that an individual is the owner of exclusive rights to the resources and assets necessary to provide a good or service and, in addition, is able to carry out production. This means that in order to receive this benefit, the consumer must conclude only one contract - with the seller-manufacturer. Moreover, if we assume that the product has only one dimension - quantity, then waste -

there is no need to incur transaction costs associated with the assessment of its useful properties. The relations of production are also simplified to the extreme: since one individual has the ownership of all the resources used, there is no problem of income distribution in accordance with ultimate performance production factors.

If one owner does not have enough resources to produce a good, then the consumer is forced to conclude a contract with many individuals, who, in turn, interact with each other. Rights to the same resource or asset can be divided between several economic agents. Under these conditions, the problem of coordinating production activities and the formation of consistent expectations of counterparties is exacerbated, and the likelihood of disputes over the distribution of income is also growing.

Due to the complementarity of resources and their imperfect divisibility in accordance with initially distributed powers, it is difficult to determine the price that the consumer must pay to each owner of the resource, which, in turn, involves clarifying the contribution of each factor of production to the product. It is easier for an individual to evaluate the value of the good as a whole than the role of each factor in satisfying the need. The problem is exacerbated in conditions of limited rationality and a tendency to opportunism: the consumer may not only be unable to evaluate the real contribution of counterparties, but also receive false information from them, since the distribution of remuneration among resource owners depends on the assessment.

At the same time, in order to ensure coordination in a decentralized production environment, the owners of production factors need to coordinate their actions by concluding many bilateral agreements. The solution to the problem can be the use of intermediary services both in relations with the consumer and in relations between resource owners. An intermediary acting as a central agent coordinates the actions of production participants and concludes an agreement with the consumer for the supply of goods or services.

Looking at the situation from the point of view of the consumer, there is a significant cost savings in concluding an agreement only with the central agent, and not with each owner of the resource separately. Resources are saved that were previously spent on drafting and agreeing on the terms of contracts, determining the amount of remuneration for each participant in the production and identifying the object of claims in case of violation of contractual obligations.

On the production side, there are also savings in transaction costs. First, instead of a series of bilateral short-term contracts between each pair of resource owners, it becomes possible to conclude one contract between the central agent and each owner. Secondly, the performance of the coordinating function by the central agent implies that he has the ability to give orders about the use of those involved in manufacturing process factors. This makes it easier to adapt to unforeseen events. Adjustment to exogenous shocks now occurs not with the help of the price mechanism, but with the help of direct instructions on the reallocation of available resources. Thirdly, the central agent controls the actions of other participants in the production and has the ability to

to ensure the fulfillment of their contractual obligations, using coercive mechanisms.

The positive effects of coordination, control and coercion are distributed among all participants in the production, while only the central agent has to bear the costs of implementing these functions. He does not take on additional responsibilities unselfishly. The opportunity for the central agent to receive remuneration arises due to the reduction in transaction costs and the emergence of a supersummative effect achieved through the coordinated unification of the efforts of several owners of production factors. Incentives for effective performance of functions are created by transferring the right to residual income to the central agent. He also has the ability to monitor the fulfillment of contractual obligations by other owners of resources and assets and stimulate them by determining the amount of remuneration based on the results of work.

The central agent becomes one of the owners of resources, which has comparative advantages in the implementation of the function of an intermediary in relation to other owners. His position may be determined by his place in the technological process, the possession of specific knowledge or information, the ability to take on the burden of risk, to carry out entrepreneurial activities or to negotiate with customers and partners.

With the advent of a central agent, resource allocation becomes less sensitive to changes in relative prices. Under these conditions, the conclusion of a relational contract is expected, which determines the general conditions and goals for establishing relations and specifies the mechanisms for making decisions and resolving conflict situations.

Thus, the firm can be further defined as a network of long-term bilateral contracts between resource owners and a central agent that replaces the market for products and resources, and in which price signals play a relatively small role, due to the provision

coordination through commands.

Typology of firms. In the previous sections, the contract was defined as a set of rules that determine, among other things, a set of rights for economic agents. At the same time, the firm can be viewed as a network of contracts. Consequently, within the firm there is a distribution of powers in accordance with the agreement reached between the individuals forming it. The distribution of powers between the owners of resources combined to achieve certain goals determines its organizational and legal form, which, in turn, affects the structure and magnitude of the costs of intra-company transactions and the system of incentives for company members.

Different types of firms correspond to one or another distribution of the five main powers identified by A. Alchan and G. Demsetz64 (not to be confused with the powers from the lists of S. Pejovic and A. Honore, which structure the right to

64 Alchian, Armen A. and Demsetz, Harold (1972), Production, Information Costs, and Economic Organization, 62 american economic review, 783.

veins). The place and role of an individual in a team is determined in accordance with the possession of one or more of the following powers:

the right to residual income (remaining after making payments to other participants);

the right to exercise control over other participants;

the right to conclude agreements with all other participants (corresponding to the status of a central agent);

the right to change team membership;

the right to sell all the powers at once and each separately.

The whole variety of firms that exist in reality can be described by analyzing the distribution of powers between their members. In order to answer the question, what is the objective function of a particular firm, it is necessary to find out which of its constituent individuals has real opportunities for decision-making and their implementation. The next step should be the specification of its objective function, or utility function. The goals of the functioning of the company, as well as the choice of ways to achieve them, will largely depend on this. Consider seven types of economic organizations.

privately owned firm is an example of a classical firm, the owner of which has all five powers at the same time. How does this affect the incentives of the owner and his subordinates, as well as the value of transaction costs?

We have already discussed the advantages of having a central agent. Its presence allows avoiding the costs of negotiating and concluding numerous contracts, reduces the cost of evaluating the contribution of production participants. The owner of a specific resource, who is more interested in continuing the relationship, becomes the central agent. The opportunistic behavior of other team members can jeopardize the return on investment made by the central agent in specific assets, so he is ready to pay the maximum price for the right to control. Having the right to change team membership allows you to create a credible threat of punishment and thus prevent employee opportunism.

The functions of ownership and management in a privately owned firm are combined, therefore, all the risk falls on one individual and the amount of his income will be determined by market conditions, entrepreneurial talent and the ability to control the work of other team members. Giving the individual the right to a residual income prevents the manifestation of opportunism on his part.

The main positive features of a privately owned firm are the powerful motivation of the owner-manager, created by the assessment and control of his actions by the market mechanism, and the associated complete identification of the individual with the business he manages.

At the same time, the concentration of the right to residual income in the sole owner leads to an aggravation of the problems of the emergence of opportunistic behavior on the part of other team members. The condition for providing dos-

The credibility of the threat of punishment is the effective control and monitoring of the activities of employees. The impossibility of exercising control over a large number of performers predetermines the small size of private entrepreneurial firms. This is the cause of other disadvantages: non-diversification of the resources used and areas of activity, as a result of which the risk increases and additional precautions are taken. A privately-owned firm may have difficulty attracting outside investment, since only the borrower's property acts as a guarantee of obligations. The problem is exacerbated if the central agent is the owner of a specific human capital: with his departure, the market value of the enterprise falls sharply. The narrowing of the time horizon due to personal circumstances may cause underinvestment, preference for savings or consumption. Finally, an important disadvantage is the need for one person to perform several functions. The limited cognitive abilities of an individual can cause his incompetence.

Based on the identified advantages and disadvantages, conclusions can be drawn about the areas of activity in which private entrepreneurial firms will be most effective. Their functioning will lead to the achievement of good results where there is little potential for economies of scale and diversity of production, relatively high returns from self-control associated with maintaining a certain quality standard of a product or service, and high costs of external control.

Vpartnership the totality of powers belongs not to one, but to several individuals, and the exercise of the right to transfer them may be limited. The right to residual income now belongs to all owners of specific resources and takes the form of profit sharing. However, combining the right to residual income and control may not, under these conditions, provide sufficient protection against opportunism. There is a risk of exacerbating the free rider problem: team members who do not identify with a common cause may find it possible to save their own efforts, while each of them will have a small share of potential losses. Restrictions on the size of the partnership are imposed due to the complexity of assessing the contribution of each partner to the total product with an increase in the size of the group, accompanied by a decrease in the degree of its homogeneity. In this situation, the risk of opportunistic behavior will decrease to the extent that it will be possible to exercise mutual control of the team members.

At the same time, an increase in the number of partners has also positive sides. As partnerships grow, financial constraints ease, allowing greater use of the positive effects of scale in production, diversification of the types of products and services provided. This also leads to a decrease in the riskiness of investments and an expansion of the time horizon of the firm's operation.

In a partnership, the right to residual income, as in a private enterprise, is combined with the right to control and manage, but the exercise of powers by an individual is possible only by agreement with other partners. This predetermines the increase in decision-making costs in

within this type of organization. A possible option to reduce the severity of the problem is the informal specialization of some members in the implementation of certain powers. At the same time, the stability of the existence of the organization may be jeopardized due to the desire of one of the partners to take a dominant position, which will lead to a deterioration in the strategic position in the firm of its other members.

Equality is usually observed between the owners of specific human capital, so partnerships are often found in the field of scientific, artistic, intellectual activity. In these areas, it is difficult to control the activities of team members. An even distribution of rights to residual income and to control, as well as the cultivation of informal relationships, is the most effective way preventing opportunistic behavior.

V self-managed firm (production cooperative) all rights are vested in the owners of both specific and general resources. At the same time, they can exercise their powers only as employees of the enterprise, which significantly narrows the time horizon of decision-makers, whose right to transfer powers is also limited.

In a production cooperative, none of the team members can independently exercise the right of ownership to capital property. The employees of the enterprise use assets only in the production process, so the members of the cooperative will prefer the distribution of profits among themselves over the implementation of investment projects. In addition, they will prevent the hiring of new workers.

The possibility of participation in the profits of all members of a self-managed firm, theoretically means the consistency of their motivations. However, in the short term, the individual may find it more beneficial to reduce the level of effort. The likelihood of opportunistic behavior increases if there are no effective forms of intra-group control, there are no sanctions for deviating from generally accepted norms of behavior. Under these conditions, the individual will receive the same salary, and the share of profits due to him will decrease slightly, in view of the relatively small reduction in the total amount. However, if each worker were to reason in this way, then this would lead to the exhaustion of the supersummative effect and a corresponding reduction in the firm's revenues.

A self-managed firm has a comparative advantage when its workers share a common value system created, for example, by a propagated ideology. Otherwise, a firm with such an empowerment structure will have problems accumulating capital and shirking collectively.

Members unprofitable firm (non-profit organization) there is no right to residual income, since the resulting profit is not distributed. The right to control can be exercised both by all members of the organization and by the appointed manager. The rest of the powers are held equally by all members of the firm, but the right to transfer them cannot be exercised: the individual can only decide on his own departure.

In the absence of the right to residual income, other factors are needed to prevent opportunism among members of a non-profit organization. They are mutually beneficial cooperation and personalization of relationships. Under these conditions, the constancy of the composition of participants is a specific asset. As an example, consider consumer cooperatives and credit unions. They arise, as a rule, by pooling the resources of people who know each other well, whose relationships are based on mutual trust and informal norms of behavior. In fact, the owners of the organization are the consumers of its services, which is an additional reason for issuing a loan for favorable conditions, so the loss of membership in the organization is a fairly serious threat of punishment. The possibility of obtaining a cheap loan can be seen as a way of appropriating part of the residual income.

At the same time, the distribution of powers in this organization can cause ineffective control over the activities of the manager, and therefore create prerequisites for the emergence of opportunistic behavior on his part, expressed in the appropriation of part of the residual income. R.I. Kapelyushnikov, referring to empirical studies, notes that these organizations are characterized by high costs and longer service life of managers, as well as slow growth due to the preference for low-income and low-risk investments.

Special mention should be made of non-profitable charitable organizations. The incentives for their existence can be a wide range of motivations: from high ideas and altruistic aspirations, to tax evasion and the desire to create a positive image for themselves. In both cases, there is also a high risk of opportunism on the part of managers who monitor the distribution of the funds raised.

V state firm the right to residual income and control are blurred. State ownership implies that the population (taxpayers) has the key powers. However, since collective decision-making requires high coordination costs, the voters tend to delegate their powers to representatives of the authorities, who in turn appoint officials to oversee the activities of the state enterprise. The official coordinates the actions of the hired manager.

In the described situation, neither owners, nor an elected representative of the authorities, nor an official, nor a manager can actually exercise the right to residual income. The collected payments for the provision of services go to the budget and can only partially be used to cover the costs of the operation of the enterprise. The amount exceeding what is necessary for these purposes is not paid to the manager and is not distributed to citizens, but goes to finance other budget items, in accordance with the adopted distribution schemes. In this situation, it is difficult both to create incentives for the manager to apply the optimal level of effort and accept effective solutions, and the owners - to control the activities of top management. If

65 Kapelyushnikov R.I. (1990) M.: IMEMO, p.74.

the enterprise turns out to be unprofitable and subsidized, then the confidence that the costs will be covered in any case, and the risk of bankruptcy is low due to the importance of the products produced, further reduces the incentives for workers and managers.

The existence of this organization presupposes the existence of several bonds between the guarantor and the executor. Under these conditions, monitoring at each stage is an undesirable process due to its laboriousness. The best way to prevent opportunistic behavior would be to create a system of incentives that permeate all links of the hierarchical chain and coordinate the motivation of the primary guarantor (consumers) and the final executor (the manager of a state enterprise). However, the situation is complicated by the inconsistency of the utility functions of the participants in this hierarchy. The population is primarily concerned about the quality and affordability of goods and services. Elected representative of power - his political career. The appointed official is concerned about maintaining his position and opportunities for growth within the bureaucracy. The manager can also think about the prospects for growth, but his immediate goal is to receive a higher reward for his efforts.

The absence of the right to income in cash makes it preferable to receive non-monetary satisfaction, in accordance with the utility functions of guarantors and executors. None of them benefit from the increase in product prices: the population, since it is a consumer, the deputy, since the adoption of such populist decisions inclines voters in his favor, the official, since this leads to a shortage, and therefore to gaining benefits from the use of non-price forms of rationing. Creating comfortable working conditions and recreation for managers and employees, although it leads to an increase in non-production costs, may not affect the price paid by the end consumer.

Note that both employees of enterprises and owners cannot transfer their powers to other economic agents. This leads to the impossibility of specializing individuals in accordance with their attitude to risk and weakens the effect of separation of functions depending on the comparative advantages in performing them. It is also difficult to use external mechanisms to control the actions of managers (obtaining an exchange valuation), there is no market for acquisitions: the scope of activity may be unattractive for the private sector, and at the same time, the state acts as a guarantor to creditors.

However, state enterprises have a comparative advantage in areas where long-term investment is needed but the outcome is uncertain and ownership is difficult to specify, such as fundamental research. In addition, the implementation of certain types of activities (defense, law enforcement) requires a high reliability of the threat of punishment and recognition of the legitimacy of power and the creation of appropriate ideological attitudes.

regulated firm. The use of various methods of regulation, as a rule, leads to a decrease in the firm's profit and its redistribution in favor of other economic agents, which limits the right of owners to appropriate residual income. The distribution of other powers depends on

enterprise size. If we are talking about a large corporation, then the right to control will belong to the manager. Owners who have the right to limited residual income will be more tolerant of managerial opportunistic behavior that manifests itself in making inefficient decisions that lead to an unreasonable increase in production and non-production costs. However, the right to control is also more or less limited, depending on the choice of method of regulation. The main factors in decision-making are: the credibility of the obligations of the government and regulatory authorities to apply the developed procedures, the speed of change in production technology, the need to regulate the volume and quality of products, as well as the possibility of capturing the regulatory body. However, even in the conditions of the credibility of the obligations of the authorities, the restriction of the rights of owners and managers affects the possibility of obtaining indirect estimates of the actions of managers when quoting shares on the stock market.

Regulation, as a rule, is applied to limit the possibility of abuse of a dominant position by one of the participants in the transaction, as well as in the presence of positive and negative externalities.

V open corporation physical capital is a specific resource. It is its owners, shareholders, who claim the right to receive residual income. At the same time, the growth in the size of the enterprise leads to the impossibility of exercising this right by a small group of people who know each other well. To manage a large company, specific knowledge and skills are required, therefore, under these conditions, the right of owners to manage is reduced to the right to control top managers, who are also given the right to change team membership.

The advantage of this organizational form lies in the limited liability of shareholders, which is an important incentive to mobilize large amounts of risk capital in an environment of high uncertainty. An open corporation has a wider time horizon, since when one of the team members leaves, no specific resources are withdrawn. The separation of the right to risk-bearing residual income and the right to manage can also lead to increased economic efficiency in a complex organizational structure. Such specialization makes it possible to transfer the risk to an individual neutrally related to it, which is the guarantor (owner of shares) and to delegate the right to make decisions to an executor who has specific knowledge or information.

At the same time, the dissipation of the right to residual income among shareholders and the delegation of the right of management by them to top managers creates certain difficulties in organizing control over the actions of the latter. The utility function of managers can include many components, but only if certain incentives are created will they be interested in increasing the profits of the corporation. Under these conditions, profits will most likely not reach the maximum level, since managers will try to overestimate the level of non-production costs, inflate staff, not make risky decisions, save their own efforts.

Among the advantages of this organizational form, it should be noted the possibility of obtaining additional information about the effectiveness of managers' actions in the form of indirect signals from the stock market. With a decrease in the level of dividends, the confidence of shareholders in the decisions of managers also falls over time, a massive dumping of shares begins, which affects their market value. It has a number negative consequences for managers of all levels: removal from office, reduction of status due to the takeover of the company, creation of a bad reputation in the market of managerial services. The latter can also be an effective means of ensuring mutual control of managers, since it is difficult for an outside observer to identify who exactly is to blame for the deterioration of the company's position.

The emergence of an open corporation is associated with the development of mass production technology, carried out in conditions of significant economies of scale. The use of such technology requires not only significant capital investments, but also complex internal organization.

Consider how changes in internal organization big company affect the system of incentives for top and middle managers. O. Williamson distinguishes three basic corporate governance structures: Y-structure, X-structure and M-structure.

The Y-structure appeared for the first time in the United States in connection with the need to coordinate rail transportation. As a result of the decentralized receipt and execution of contracts for the construction of railways, a technologically unified canvas was divided among autonomous owners. In this situation, the costs of coordinating the interaction of economic agents and concluding contracts increased. An attempt to solve problems was the creation of the first of its kind formal administrative structure managed by professional managers.

After a number of improvements, a decentralized linear-headquarters or unitary organization model (U-structure) appeared, within which there is a division of areas of activity between line and functional managers. The first were the heads of the company's divisions, formed on a geographical basis, and were responsible for the management of employees who performed basic operations. The second set production standards and were located in the central office. All managers reported directly to the president of the company. The regional offices also had functional managers responsible for traffic flows, customer service, repairs and bookkeeping. They were not accountable to functional managers from the central office, but to the heads of departments.

The main disadvantage of the linear-staff model is the multi-link hierarchical levels, which implies the adoption of basic decisions by top management. Such a concentration of powers is unreasonable and ineffective for a number of reasons. Firstly, information, in the process of repeated transmission, as a rule, is distorted and loses its relevance. Moreover, the likelihood of employee opportunism manifesting itself in the form of hiding relevant data increases. Secondly, this method of decision-making does not take into account the limited attention and cognitive abilities of individuals.

As corporations grew in size, the identified problems became more and more acute. Functional managers could no longer recognize global strategic goals firms and participate in achieving them, they were more concerned about the condition of the subdivisions they led. The volume of information also turned out to be too much for line managers to process.

The solution was the allocation of relatively independent units on a functional basis. This criterion is met by the holding model (X-structure) and the multidivisional model (M-structure). Their use allows to increase the efficiency of intra-company management, as it helps to save on the cognitive efforts of managers, while reducing the distortion of information flows, due to the reduction of intra-company communications.

66 Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, "relational" contracting, St. Petersburg: Lenizdat, p. 445–471.

The holding structure appeared earlier than the multidivisional one and, although it had advantages over the unitary one, in terms of information processing capabilities, it was not without significant drawbacks. The divisions of the X-structure have excessive autonomy, which does not allow top managers to exercise effective control over the activities of the heads of functional subdivisions. Within the framework of the X-structure, it is difficult to create mechanisms for matching incentives, control, audit, dispute resolution, which hinders the process of effective adaptation to exogenous changes, due to the propensity of management units to opportunistic behavior.

Opportunism can manifest itself in several forms. First, in relations with subsidiaries in the redistribution of income received in order to optimize the investment process. The greater the autonomy of units, the more difficult it is to assess the economic performance of a structural unit, both through audits and through threats of punishment for providing false information. At the same time, the possibility of intra-company cross-subsidization undermines the incentives of department heads to reduce costs, including non-production ones. Secondly, when key decisions are made by a body consisting of heads of structural units, there is a danger of replacing the global development goals of the company with subgoals of functional units and the development of a mutually beneficial way of decision-making, when a proposal is voted for only in anticipation of a similar attitude to one's own proposals.

To solve these problems, in the 1920s, P. Dupont and A. Sloan developed a multi-divisional management structure, within which the existence of semi-autonomous divisions was assumed. These units were supposed to function on the principles of self-sufficiency. The main performance indicator was the amount of profit that could be generated using the resources allocated by the head office. Right of use Money under these conditions, it became the object of investment competition between divisions. Another important innovation was made: the goals of the company's functioning in the short and long term were determined different people. Operational decision-making should be concentrated at the lower levels of the hierarchy, and strategic decisions at the highest. The management of the production process within the division was carried out by its head, and the adoption of strategic decisions became the task of the general directorate, which consisted of several general managers with their own staff of advisers and experts. This made it possible to reduce the likelihood of making mutually beneficial decisions, since managers no longer expressed the interests of one of the departments. In addition, within the framework of the M-structure, top management had the opportunity to control and coordinate the activities of departments, conduct internal audits, allocate resources and carry out strategic planning, which created an adequate system of incentives for them to achieve global goals for the functioning of the entire company.

In this way, organizational characteristics M-structures make it possible to take into account both the bounded rationality of individuals and their propensity for opportunism. The specialization of various levels of the hierarchy in making tactical or strategic decisions prevents the dispersion of attention, the distortion of information flows and allows you to use the benefits of specialization in obtaining and applying specific knowledge and skills.

O. Williamson notes that the choice of Y-structure, X-structure or M-structure is carried out on the same grounds as the choice of production technology and the degree of specificity of assets (this model is given in the last section). The use of the X-structure and M-structure increases the efficiency of the functioning of the corporation, due to the improvement of information processing. However, the use of these models can lead to the development of managerial opportunism. Guarantees that reduce the risk of opportunistic behavior are created within the M-structure.

4.4. Interaction of institutional agreements

Vertical integration. In the previous sections, some aspects of the replacement of market relations by intercompany ones were considered in connection with the adoption by individuals of decisions on voluntary

unity for the production of goods and services. Our focus now is on the voluntary (and sometimes forced) merger of two firms that previously operated autonomously in adjacent production stages. In fact, this means a transition to unilateral transaction management, which implies the concentration of rights to residual income and control in the hands of the owner of a single firm.

Vertical integration is the process of replacing transactions in resource and product markets with intra-company transactions.

Among the many reasons for vertical integration in the new institutional economic theory, the possibility of reducing transaction costs is considered a priority. Indeed, within the framework of joint management, it is possible to adapt to unforeseen events without additional negotiations, which is the best guarantee of a return on specific investments. At the same time, during the transition to administrative management, the problem of coordinating the system of incentives of the contractor with the goals of the guarantor arises. As a rule, the principle of remuneration is used for this, which includes a variable component that changes depending on the results of work.

Let us consider two combination schemes in succession: the takeover of a small owner-managed firm by a larger one and the merger of two large firms in which the rights to residual income and control are exercised separately both before and after the merger.

Among the shortcomings of intra-company transaction management, one should note the impossibility of applying the powerful incentives that arise when the right to residual income and control are combined, due to the negative attitude of the performer to accepting the burden of risk. Obviously, the situation changes if the contractor is an individual who was previously an independent entrepreneur. The main question now is: does the efficiency of the functioning of an economic unit, which was previously autonomous, change when it is joined on the terms of retaining the right to residual income. Theoretically, this involves the use of incentives associated with the conduct of market transactions within the firm. Under these conditions, operational decisions are made within the unit, that is, the advantages of a multidivisional organizational structure can be used. The financial independence of the division involves the development of transfer prices, at which products are transferred to subsequent production stages. The problem arises when it is necessary to adapt to changing market conditions, which involves adjusting transfer prices. The head of the division is exposed to the risk of unreasonable price cuts, leading to a decrease in the net income of the division. Also, the right to residual income may be limited by the decision of the general directorate to attribute additional costs to the account of the unit. The situation becomes more complicated if the production of a product or service involves the periodic development and implementation of technological and organizational innovations, the benefits of which, as a rule, only partially accrue to the innovator himself, and he bears the costs in full, even in case of failures. The head of the division is forced to agree to the conditions put forward by the general directorate, since he is now deprived of the opportunity to withdraw

assets. His disagreement will entail not only legal, but also physical alienation of resources that previously belonged to him: he will be fired or transferred to another position. At the same time, the lack of ownership of the assets by the manager may lead to irrational use within the division.

Let's consider another option: in the acquired firm, the functions of ownership and management have already been separated. A merger can have various implications for the motivation of managers. On the one hand, there is a decrease in the status of top managers to heads of departments, on the other hand, within the framework of the merged company, there are more opportunities for career growth. At the same time, the parent company may have other traditions for accruing a fixed wages and bonus payments. As a result of the merger, there are also problems associated with an increase in the bureaucratization of management during the expansion of the company. First, the increase in the size of a firm with many divisions makes selective intervention more difficult, as it becomes increasingly difficult to evaluate the performance of all business units. At the same time, the control of owners over the activities of top managers is weakened. Secondly, department heads may seek to use the firm's resources to achieve non-strategic sub-goals, which is also manifested in the practice of making mutually beneficial decisions. Thirdly, when technology changes, there will be “dependence on the previous development path”, meaning that instead of entering into contracts with new counterparties, the company will try to modernize existing assets. At the same time, the head and employees of the unit may resist if the modernization leads to a decrease in their wages or status in the company.

Thus, it becomes clear that the vertical integration of previously independent counterparties leads to a number of negative consequences, the main of which is the inability to use powerful incentives to improve the efficiency of functioning inherent in market transactions. At the same time, it serves as a guarantee of return on investment in specific assets and facilitates the adoption of adaptive consistent decisions.

Let us consider in more detail in which cases vertical integration is the right strategy in terms of minimizing transaction costs. O. Williamson distinguishes three possible directions of integration: with the marketing stage, with the stage of supplying resources (raw materials) and the accession of manufacturers supplying various components of the final product67. At the same time, it is considered that there is a core technology, the integration of the stages of which is natural, that is, technologically and economically conditioned.

At the stage of product sales, the manufacturer's reputation is a specific resource. Therefore, vertical integration will be carried out if specific conditions are required to maintain the quality of the products sold, or specific knowledge is required to demonstrate the product, train it in the correct handling and provide after-sales service.

67 Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, "relational" contracting, St. Petersburg: Lenizdat, p. 181.

Quality assessment issues can also cause vertical integration with the resource delivery stage. In addition, for a number of industries, the transition to the use of resources with different characteristics (for example, from another field) increases not only transportation costs, but also requires adjustment of equipment and the acquisition of specific skills by personnel. The more specific a resource is for a given production, the greater the likelihood of vertical integration.

ISV affiliation occurs when the threat of reputational damage is not sufficient to prevent opportunistic behavior. If the benefits of opportunism outweigh the returns generated by providing quality parts or by adapting to changing conditions based on common interest arrangements, then investment in specific assets within the transaction may be at risk. The creation of unilateral guarantees, when concluding long-term contracts between independent partners, entails the transfer of risk to the counterparty providing the guarantee. Therefore, the higher the specificity of the supplied parts, and the more difficult it is to determine their quality, the more likely it is to unite within a single company.

Hybrid form of institutional arrangements involves the emergence of a two-way dependency that does not require full integration. The hybrid form covers a wide range of contractual relations between market and intra-company, which corresponds to the previously defined neoclassical and relational contracting. The most effective way to reduce transaction costs under these conditions is tripartite and bipartite transaction management.

A hybrid institutional agreement is a long-term contractual relationship that preserves the autonomy of the parties, but involves the creation of transaction-specific precautions that prevent the opportunistic behavior of the participants.

The use of technology that involves the use of specific assets or the creation of specific products allows you to reduce production costs, reduce the price of goods and services, thus increasing the benefits of exchange. However, in the absence of certain guarantees, the risk of opportunistic behavior on the part of one of the counterparties increases. The strongest guarantee is the concentration of rights to residual income and control in the hands of one individual, which in fact means the creation of a hierarchical intra-company management structure. At the same time, this does not allow the use of strong market motivation to improve the efficiency of producers, and also leads to reduced economies of scale or diversity. That is why, under certain conditions, it may be sufficient to create guarantees that allow the use of the stimulating effect of the price mechanism, but at the same time reduce the risk of opportunism on the part of the partner.

The most acceptable way out in the conditions of average specificity of assets is to apply to a specialized arbitration body that has advantages in conducting an expert assessment of the subject of the dispute. Relatively

the low potential for coercion should in this case be compensated by trust in the decision to resolve the conflict situation.

As the level of asset specificity increases, matching of the parties to each other becomes more important, and the costs of using arbitration can be prohibitively high, since the relevant information is not always verifiable. Under these conditions, it is necessary to create guarantees that contribute to the revision of the system of incentives for counterparties. First of all, we are talking about the provision of collateral, forcing the partner to also bear the costs in the event of an interruption of the relationship.

At the same time, the use of guarantees in the form of collateral has a number of disadvantages, which are the result of opportunism on the part of a counterparty that owns specific assets. In order to withdraw the collateral, he can provoke the termination of the contract (withholding relevant information when concluding it). The situation becomes more complicated if there are difficulties in estimating the size of investments in specific assets. Attempts to expropriate collateral may also be made during negotiations to renegotiate the terms of the contract in order to adapt them to changing market conditions.

All of the above disadvantages are especially relevant in the context of the existence of monetary collateral. Problems can be partially solved if specific assets are created by both counterparties. In this case, the likelihood of continuing their interaction increases.

Hybrid agreements are often used in the areas of production and services, where it is difficult to assess the quality of the products or the actions of the contractor. Under these conditions, the reputation of counterparties turns out to be a specific resource, which necessitates the creation of incentives for a partner that can influence the creation of a reputation in order to maintain it at the proper level.

Let's take a franchise system as an example. Under a franchise agreement, the performer (franchisee) receives from the guarantor (franchisor) the right to use the trademark, and possibly some specific knowledge and skills, in exchange for start-up payments and royalties. From the point of view of the franchisor, this agreement is beneficial, as it allows you to attract capital resources for the development of the network on more acceptable terms. In addition, such agreements allow the use of a strong market motivation, since the right to residual income remains with the franchisee. The franchisee also benefits from the ability to quickly develop the market by entering it under a well-known brand name. However, the need to maintain the reputation of a brand as a specific asset leads to the fact that organizationally independent franchisees have to agree to a number of conditions: comply with established quality standards, purchase raw materials only from predetermined suppliers, limit their activities to the provision of goods and services offered under this brand . The fulfillment of some of these conditions requires the franchisee to invest in specific assets that act as collateral and signal the reliability of his obligations. If, as a result of the inspections, it is found that service quality standards have been violated, the franchisee will incur significant irreversible costs. At the same time, the franchisee also expects the creation of guarantees from the franchisor, which can be expressed in the establishment of subsidiaries selling products under the same brand name. An interesting fact is that royalty and start-up payments are rarely reviewed within franchising networks, that is, there are some adaptation limits in which changes in relative prices do not affect the relationship of counterparties. Effective distribution of risks between the guarantor and the executor allows not only to maintain the reputation, but thus has an impact on the survival of the system as a whole.

Choice between discrete institutional alternatives. In the course of the previous presentation, one way or another, the issues of determining the comparative advantages and disadvantages of various institutional alternatives were considered. This section will summarize the findings and identify the main selection criteria.

Let us note the difference in the neoclassical and neoinstitutional approach to this issue. Based on the premises of orthodox neoclassical economic theory, it is possible to model a clearly identifiable optimal outcome. Thus, the choice is made according to the principle of the best correspondence of the used alternative to the parameters determined on the basis of the constructed models. In the process of modeling, as a rule, there is a refusal to consider a number of characteristics, which, nevertheless, under certain conditions, can have a significant impact on the behavior of counterparties within the framework of institutional alternatives. The new institutional economic theory does not assume the achievement of an optimum. The main purpose of the analysis is to identify the comparative advantages and disadvantages of discrete institutional alternatives in certain conditions. The process of choosing an alternative thus includes an assessment of the basic parameters of the institutional environment and the key characteristics of transactions. The best possible alternative would be one that minimizes the combination of transformation and transaction costs.

The two main types of transaction costs are the costs of obtaining information and preventing or preventing counterparties from opportunistic behavior. These costs turn out to be interrelated: the more relevant data can be identified, the lower the likelihood of opportunism. Different types of opportunistic behavior can be distinguished: failure to provide information, shirking, extortion and blackmail. Manipulation of relevant data is possible due to their asymmetric distribution between counterparties. Delaying is typical for the relationship between the guarantor and the contractor, when the latter manages to hide the unfair fulfillment of the terms of the contract, for example, by applying a suboptimal level of effort in completing the task. An individual who invests in specific assets is subject to extortion. In the event of a break in relations, he incurs high irreversible costs. At the same time, blackmail is possible on the part of the owner of specific, primarily human, assets, since the implementation of transactions using specialized technology is beneficial to both counterparties.

The way to deal with manifestations of opportunism depends on the chosen structure for managing contractual relations, which, in turn, is determined by the key characteristics of the transaction. As a rule, asset specificity is considered as the main one. If the level of specificity is low, then rational counterparties will not create specialized governance structures. As the level of specificity increases, the parties will try to provide guarantees of return on investment. However, the more resources required to create guarantees, the more the risk is transferred to the counterparty providing them. The best solution to the emerging problems is the transition to unified management, within which the transaction costs associated with concealment of information, extortion and blackmail can be minimized to the greatest extent. At the same time, the positive effect can be blocked if, for some reason, it is difficult to use adequate methods to prevent and suppress shirking. As an illustration, we use the scheme of O. Williamson68.

Figure 4.1. Transaction Management Methods and Level of Specificity

assets

AG - the difference between the costs of market and intra-company transaction management, AC - the difference between the costs arising from the production of goods within the company and the costs associated with the purchase of goods on the market, k - the specificity of assets.

The main conclusion of the model is that the higher the degree of asset specificity, the greater the benefits of intra-company management compared to market management. The rivalry that accompanies market exchange stimulates counterparties to make effective decisions, but with the growth of interdependence of partners there is a risk of blackmail and extortion, therefore, the costs of independent parties to the agreement to ensure the continuity of relations and return on investment in specific assets increase. If counterparties unite

68 Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, "relational" contracting, St. Petersburg: Lenizdat, p. 164.

are employed to carry out production, they have to spend resources on solving problems inherent in hierarchical structures, first of all, to coordinate the motivations of the guarantor and the executor. That is why, with low asset specificity, which makes it easy to change partners, it is advisable to take advantage of the incentive effect of market mechanisms; with an increase in the degree of specificity, the costs of monitoring and stimulating the actions of the performer turn out to be less than the costs that the parties will incur in the event of a break in relations. These considerations are the basis for representing the function AG as decreasing. At the same time, the implementation of the production of goods for own needs does not allow realizing economies of scale and diversity, and also implies the rejection of the benefits of specialization and division of labor. From this point of view, market purchases will always be more profitable, but the more specific the equipment used and the goods produced, the narrower the circle of potential buyers, and the lower the benefits of demand aggregation. This is why the AC function also decreases as asset specificity increases. At an asset specificity level of k*, counterparties do not care whether the transaction is carried out under a market or intracompany control mechanism.

However, there are hybrid forms of contract management. Scheme A.E. Shastitko69 allows taking into account the peculiarities of choosing from three institutional alternatives: market, hybrid and hierarchy.

Figure 4.2. Choosing Between Market, Hybrid and Hierarchy

= Cf-Cm = Ch-Cn

Where AC \u003d Cf - Csh \u003d Ch - On, the difference in transformation costs within the hierarchy and hybrid forms, on the one hand, and the market, on the other; G is the level of transaction costs; k - asset specificity.

The model assumes that the level of transformation costs is fixed. Transaction costs increase at an accelerating rate as the degree of asset specificity increases. Reducing the costs of transactions is possible with the transition to a new discrete institutional alternative (from the market to a hybrid form and further to intra-company management). At the point Ai(ki,Gi), counterparties do not care what control mechanism to use. A further increase in the degree of asset specificity leads to an increase in the comparative advantages of hybrid forms. The same logic operates at the point A2(k2,G2), which is the transition point to the intracompany

Shastitko A.E. (2002) M.: TEIS, p.438.

mu management. The A0A1A2A3 curve can be viewed as a line of minimum transaction costs at different levels of resource specificity, or as a line of optimal contracts.

In the presented models, the key characteristic of a transaction is the specificity of the assets involved in it. At the same time, the level of uncertainty, which depends, among other things, on the existing institutional restrictions, has a great influence on the value of transaction costs.

When evaluating the comparative advantages of an institutional alternative, it is also necessary to take into account its compliance with the characteristics of the institutional environment. The choice can be influenced by both informal rules and formal regulations and legislation. The system of taxation, certification, a direct ban on the use of certain organizational forms, have a significant impact on the transaction costs of counterparties. An important characteristic is also the stability of rules, economic indicators, production and organizational technology. Changing all these parameters requires adaptation, during which there is a risk of manifestation of opportunistic behavior in any of its forms.

In addition, the models presented earlier assumed that the degree of asset specificity does not affect the level of transformation costs. However, the choice of a transaction management mechanism and technology for the production of goods or services are closely interrelated. Thus, the specificity of the assets used and the method of contracting are interdependent characteristics.

The choice under the conditions of minimizing the totality of transformation and transaction costs can be shown using the following scheme by O. Wil-

Figure 4.3. Choice while minimizing the sum of transaction and transformation costs

70 Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, "relational" contracting, St. Petersburg: Lenizdat, p.76.

К - specificity of assets, S - guarantees, p] - price of goods produced using general-purpose assets p2 - price of goods in the production of which specific assets were involved, but the parties did not provide the necessary guarantees p3 - price of goods for the production of which were carried out investments in specific assets and guarantees of their payback were provided.

The greatest benefits from the exchange are achieved at point C, however, if it is impossible to create guarantees in the form of credible obligations or credible threats of punishment that reduce the likelihood of opportunism, counterparties will have to sacrifice the benefits of using specialized technology, which will lead to an increase in transformation costs and a shift to point A Point B is the least attractive, since being at it, the parties are forced to compensate for the lack of guarantees by paying a risk premium.

Thus, it is not possible a priori to determine the best alternative. Conducting an institutional analysis involves a narrow focus of the study and, if possible, a more complete account of all the characteristics of the relations within which a particular transaction takes place.

Basic concepts of the chapter

Vertical integration

Hybrid Institutional Agreement

Classic contract

Contract

Transaction management mechanism

neoclassical contract

Implicit contract

Relational Contract

specific asset

Functionally complete contract

Review questions

What is the specificity of the definition of a contract in the new institutional economic theory?

List the main criteria for distinguishing three types of contracts according to McNeil.

Name the key characteristics of transactions according to O. Williamson and explain how they affect the exchange process.

How do transaction management mechanisms change depending on changes in the characteristics of ongoing transactions?

Define the market and list the main types of transaction costs that are characteristic of market exchange.

What is the main criterion for the classification of markets in the new institutional economic theory.

What are the comparative advantages and disadvantages of different market types.

List the main reasons for the formation of the company.

What safeguards against opportunistic behavior in the form of extortion exist under various transaction management mechanisms?

List the main types of transaction costs characteristic of intra-company exchange.

What criteria are used to classify firms?

Give brief description various types of firms.

What are the reasons for vertical integration?

What are hybrid institutional arrangements?

What are the criteria for selecting discrete institutional alternatives?

Questions for reflection

What reasons do you think explain the fact that large trading companies, who own widespread department store chains in Europe and the world (IKEA, Auchan, C&A, Marks & Spenser, etc.) in the 1990s. did not show interest (or showed only insignificant interest) in the Russian market, while a number of large manufacturing transnational corporations (such as, for example, Coca Cola) has been present here since the early 1990s?

Find a logical contradiction in the statement: "A relational contract is characterized by high asset specificity, a regular frequency of transactions, and a high level of uncertainty."

Comment on the following statement: "The existence of different types of markets is due to differences in the characteristics of the goods consumed."

Literature

Main

Coase R. (1993) Firm, market and law, M: business.

Williamson O.I. (1996) Economic institutions of capitalism. Firms, markets, relational contracting, St. Petersburg: Lenizdat.

Shastitko A.E. (2002) New Institutional Economics, Moscow: TEIS, ch.12–14.

Additional

Kapelyushnikov R.I. (1990) Economic theory of property rights, Moscow: IMEMO.

North D. (1997) Institutions, institutional changes and the functioning of the economy, M: Beginning.

Alchian, Armen A. and Demsetz, Harold (1972), Production, Information Costs, and Economic Organization, 62 american economic review, 777–795.

Macneil, Ian R. (1974), Reflection on Relational Contract, 41 Journal of Institutional and Theoretical Economics, 541–546.

One of the most important characteristics of a transaction is the nature of the capital investments made by the participants in the transaction.

For the first time, the concept of specificity of resources was introduced into economic theory by G. Becker in 1964 in relation to investments in human capital. If a resource is of interest to many producers and its market value does not depend much on where it is used, then this is a general-purpose resource. A specific resource is a resource that, if the transaction is interrupted, cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced if it is used elsewhere.

Kinds:

1. Site specificity associated with too much resource movement overhead. It is possible to assume the presence of location specificity if the enterprises are located in geographical proximity to each other. An example of location specificity would be a power plant built in close geographic proximity to a coal mine. This location saves on transport costs and the costs associated with storing coal reserves.

2. Physical asset specificity. Physical capital specificity is said to be when a party or one of the parties has invested in equipment with certain characteristics that has less value when used in other projects. An example is the furnaces of power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition).

3. Specificity of human capital (human asset specificity). The specificity of human capital is said to be when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than the same workers do, but do not have specific human capital. An example of specific human capital is the manager's knowledge of the administrative features and management culture of the firm in which he has worked for many years. This specific knowledge is of value only to the given firm and depreciates if the manager loses his job in the given firm, for example, as a result of a hostile takeover of the company he manages. The concept of the specificity of human capital can also refer to the relational skills that arise when working as a team, when all team members know each other well.

4. Specificity of target, or "intended", assets (dedicated assets). Here we are talking about an investment in general-purpose resources, which, however, may be intended for a single specific user. The supplier makes this investment in the hope of selling a significant amount of product to a specific customer. If the contract is terminated, the supplier is left with significant inventory, because there is no demand for them from other buyers. The same situation can develop on the buyer's side.

5. Temporal specificity. This is a characteristic of investments where the coordination of production is essential (for example, in the production of perishable foodstuffs, the expiration date of which complicates the coordination of production), and the system of prompt supply becomes a decisive factor. The value of resources not delivered on time is significantly reduced.

6. Specificity of reputation, trademark (brand name specificity). It is a non-returnable investment in building a reputation or brand that will lose its value if the firm's products or services are of poor quality.

Extortion - this is a kind of opportunistic behavior that occurs after the conclusion of a transaction, the essence of which is the redistribution of quasi-rent, infringing on the interests of the party that made specific investments. The extortion problem arises from a combination of resource specificity and contract incompleteness. Concerns about these problems lead to inefficient use of resources: firms, fearing that the investments made will make them vulnerable to extortion, refuse to invest in specific resources. The correct choice of the type of contract and the method of organizing the transaction helps to solve the problems arising from the danger of extortion. In our printing press example, publishers typically own the printing presses rather than rent them. In America, many railways, which were segments of a single through transport line and were in separate ownership, were integrated at the end of the 19th century. Until that time, separate ownership of separate sections of the through railway led to constant battles for the share of companies in the total cost of transportation, if it went beyond one section of the railway. Integration eliminates the danger of expropriating the income that the party that has made a specific investment expects to receive from these investments.

One of the most important characteristics of a transaction is the nature of the capital investments made by the participants in the transaction.

For the first time, the concept of specificity of resources was introduced into economic theory by G. Becker in 1964 in relation to investments in human capital.

If a resource is of interest to many producers and its market value depends little on where it is used, then this general purpose resource.

Specific namethe resource is being which, in the event of an interruption of the transaction, cannot be used in other projects without compromising its economic value.

The degree of specificity of a resource can be judged by how much the value of the resource will be reduced if it is used elsewhere.

It is customary to single out the following types of resource specificity.

Location Specificity(site specificity) is associated with too much resource movement overhead. It is possible to assume the presence of location specificity if the enterprises are located in geographical proximity to each other.

An example of location specificity would be a power plant built in close geographic proximity to a coal mine.

This location saves on transport costs and the costs associated with storing coal reserves.

Specificity of Physical Assets(physical asset specificity). Physical capital specificity is said to be when a party or one of the parties has invested in equipment with certain characteristics that has less value when used in other projects.

An example is furnaces, power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition).

3. Specificity of human capital(human asset specificity).

The specificity of human capital is said to be when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than the same workers do, but do not have specific human capital.

An example of specific human capital is the manager's knowledge of the administrative features and management culture of the firm in which he has worked for many years.

This specific knowledge is of value only to the given firm and depreciates if the manager loses his job in the given firm, for example, as a result of a hostile takeover of the company he manages.

The concept of the specificity of human capital can also refer to the relational skills that arise when working as a team, when all team members know each other well.

4. Specificity of target or “destined” assets(dedicated assets).

Here we are talking about an investment in general-purpose resources, which, however, may be intended for a single specific user.

The supplier makes this investment in the hope of selling a significant amount of product to a specific customer.

If the contract is terminated, the supplier is left with significant inventory, because there is no demand for them from other buyers.

The same situation can develop on the buyer's side.

5. Specificity is temporary(temporal specificity).

This is a characteristic of investments where the coordination of production is essential (for example, in the production of perishable foodstuffs, the expiration date of which complicates the coordination of production), and the system of prompt supply becomes a decisive factor.

The value of resources not delivered on time is significantly reduced.

Specificity of reputation, trademark(brand name specificity).

It is a non-returnable investment in building a reputation or brand that will lose its value if the firm's products or services are of poor quality.

An economic agent that has invested in specific assets finds itself in a vulnerable position.

Outside of this transaction, specific investments lose their value; for other economic agents, they do not represent the same value.

If the transaction is not executed, then the party that made the specific investment loses its investment.

In such a situation, when the party that has made specific investments is, as it were, "locked" in a deal with its partner, there is a danger of opportunistic behavior on the part of this partner, which is called "extortion" (hold-up).

This relationship is often two-way.

Prior to the conclusion of the transaction, the economic agent faces a large number of sellers, and he has the opportunity to choose, however, after the conclusion of the contract, competitive relations are replaced by relations of bilateral monopoly if investments are made in transactions-specific investments in physical or human assets.

What O. Williamson called "fundamental transformation" is taking place.

The attraction of investments in specific assets is that they can lead to lower production costs and thus provide additional income.

It is this additional income that arises from the pooling of specific resources and is called "quasi-rent", and is the goal of opportunistic behavior.

The partner of the party that made the specific investment is able to "extort" most of the surplus created by the specific resource by threatening to cancel the deal.

So now we can formulate the concept "extortion" as follows: this is a kind of opportunistic behavior that occurs after the conclusion of a transaction, the essence of which is the redistribution of quasi-rent, infringing on the interests of the party that made specific investments.

Extortion often takes the form of "elusive" opportunistic behavior that does not violate the terms of a formal contract.

When combining interspecific resources, i.e., specialized complementary, mutually unique resources with respect to each other, the maximum value of which is achieved only in a given firm, a supertotal effect arises, which is the source of quasi-rent.

This quasi-rent is divided among the owners of specific resources.

When an economic agent decides to enter the industry, he compares the income that he will receive with the investments that he needs to make. The portion of income that is above the minimum amount required to attract a firm to the industry is rent.

Rent arises, as a rule, on a limited resource (moreover, restrictions can be both natural and artificial).

However, once the investment has been made, returns may be lower than anticipated.

They may not even pay back the capital investments made by the economic agent.

Quasirent is the portion of income in excess of the minimum amount required to keep a producer in the industry.

Quasirenthat can be defined as follows: it is the difference between the return on a factor when it is used in a given location and the return on its alternative best use case.

An example here is a steel mill located near a power plant that makes investments that depend on whether the plant can buy energy at a certain price.

After making an investment that has a sunk cost, the utility can raise the price of energy and the steel mill will still operate because the marginal benefits, even at a higher energy price, will exceed the marginal cost, even though the sunk investment is won't pay off.

Rent is a surplus compared to the average total cost.

Quasirent- surplus compared to average variable costs. In a competitive economy, rent is a transient phenomenon, while quasi-rent is quite common.

It is created whenever non-recoverable specific investments are made.

Therefore, quasi-rent is more common than rent.

Quasi-rent can be either equal or less than the rent, but it cannot exceed the rent.

To keep a firm in an industry, a lower income than is needed to attract it to the industry is sufficient.

The difference between them arises from the presence of costs that the firm (or employee) incurs when entering the industry, and which it cannot return if it leaves this market.

The payment for the quasi-rent brought in is an increased riskiness of specialized investments, the need to seek additional guarantees against a partner's violation of his obligations.

The quasi-rent can be expropriated, and the owner will not extract the factor from the given sphere of its use.

Ways of expropriationquasi rents may be the following.

Illegal way (for example, by gangsters through racketeering).

The legal way is by specialized resource owners, where a specific resource is dependent on another resource that is unique in some way. When the owner of this unique resource withdraws his resource, and the substitutes are either very expensive or of lower quality, then there is a withdrawal of the quasi-rent attributable to other specific resources.

There is another type of dependence, which is associated with the asymmetry of information. In this case, the expropriation of quasi-rents can occur if the performance is difficult to measure and it is difficult to prevent dishonest work, while close substitutes may be quite available. For example, an unskilled worker jeopardizes a firm's reputation and its specialized brand investment.

The expropriation of the quasi-rent by one of the parties to the transaction is just a redistribution of wealth.

That is why it would be wrong to use antitrust law in situations that are characterized by resource specificity, despite the emergence of a bilateral monopoly relationship after a contract has been concluded and investment in specific resources has been made.

Antitrust laws are designed to protect consumers from high prices and limited supply caused by producer monopolies, and the expropriation of quasi-rents does not increase prices for consumers.

It concerns the redistribution of income between the parties to the transaction and does not affect market prices, since quasi-rent is income on non-recoverable capital.

The appropriation of quasi-rent is associated with resource costs and does not create any value, but only redistributes it.

The threat of extortion from a partner is a major barrier to specialized investment.

If no way can be found to prevent the expropriation of the quasi-rent, then economic agents will not invest in specific resources.

The extortion problem also arises from a combination of resource specificity and contract incompleteness.

Preoccupation with these problems leads to inefficient use of resources.

Thus, firms, fearing that the investments made will make them vulnerable to extortion, refuse to invest in specific resources.

To solve problems arising from the risk of extortion, helps right choice type of contract and method of organizing the transaction.

However, other solutions to the problem of extortion are possible, related to the mutual trust of the parties.

The theory of transaction costs assumes that an economic agent who may behave opportunistically after the conclusion of a transaction is difficult to determine before the transaction is concluded, and those who choose the type of contract and the way the transaction is organized must constantly consider the potential for extortion from the partner by deal.

This economic theory focuses on the performance of the agreement, or lack of it, and the problems that arise from it, rather than on trust, or the lack of it.

In real economic life, as partners communicate, opportunities arise for the manifestation of opportunistic behavior, and whenever a partner does not use them, trust increases between the parties, which can lead to the rejection of more stringent forms of guarantees, all other things being equal.

Trust takes time to develop, so the longer the relationship, the higher the level of trust to be expected.

There are the following types of trust.

Mutual trust can be manifested in the observance by each party of oral or written agreements. This type of trust can be called "confidence in the treaty"(contractual trust). Any transaction is based on contractual trust. These promises may not even be fixed in a written contract, but simply in accordance with customs. business turnover the more the parties rely on verbal agreements rather than on the formal terms of the contract, the higher the level of "trust in the contract".

This type of trust refers to the expectation that the partner is competent enough to fulfill his obligations. It is about technical and managerial competence, and this type of trust can be called "trust in the competence" of the partner(competence trust). One of the parties may terminate the relationship if there is opportunistic behavior, however, if the reason is lack of competence, then the other party may be given another chance if there are grounds that the situation will be corrected within a fairly short period of time.

An indefinite type of trust, relating rather to the mutual expectations of partners that their counterparty will be ready to meet them halfway, to do more than is formally expected of him. This type of trust is called "trust in the good will" of the partner(goodwillimsi). There are no explicit promises here to be denied, no fixed professional standards. When we talk about the reputation of a partner, we mean the first two types of trust rather than trust in good will.

The first two types of trust are based on universal standards and can be learned about by collecting information in the reputation market.

The third type of trust is defined rather in the context of a particular transaction.

Depending on the type of trust, opportunism will manifest itself and be perceived differently.

Withholding technological information that could determine the commercial success or failure of a risky project is opportunistic behavior in terms of trust in good will, but such actions cannot be considered opportunistic behavior in terms of contract trust unless the partners have agreed to share this information.

Economists define trust as a type of risk.

When we say that we trust or trust someone, we implicitly mean the following: the likelihood that this person will take actions that are beneficial to us, or at least not harm us, is high enough to consider the possibility of any form of cooperation with him.

The problem of trust can be illustrated in economic theory by the prisoner's dilemma game or its one-sided version.

Economists offer a number of solutions to this one-sided prisoner's dilemma.

These decisions consist of some game changes in order to encourage the players to choose a strategy that will lead to a mutually beneficial outcome.

The logic of economic decisions is this: if individual incentives force the choice of a strategy that leads to a non-cooperative outcome, then incentives can be used to encourage players to cooperate.

Thus, in transaction cost theory, the problem of post-contract opportunism created by specific investments can be solved if A provides for their guarantee in the contract in order to protect himself from B's possible opportunistic behavior.

Thus, in economic theory, an economic agent can be considered trustworthy if he has no incentives to take advantage of the trust of others.

Conversely, it can be safely expected that with "the right incentives" even a reliable partner will not justify trust.

Exists four main categories of dilemma solutions, whovanishing in the game of "trust", proposed by economists.

1. Changing player preferences. In this case, external or internal changes in the preferences of the players are introduced, so that the players prefer to cooperate rather than follow a short-sighted strategy to maximize their own benefit. In the case of exogenous changes, it is assumed that the agent has a preference for justifying trust, since otherwise he will experience shame (this is an external sanction). In the case of endogenous changes, an emotional predisposition to cooperation is introduced, which gives rise to a sense of guilt for deceit, which implies the internalization by the player of norms that prohibit receiving benefits at the expense of another player.

2 . Signing an explicit contract. Another way to solve a problem in the game of "trust" is to sign an explicit binding contract for the parties, protected by a third party and requiring the players to choose a set of "trust, justify the trust" strategies. These contracts can take one of two forms: 1) control with punishment; 2) control with stimulation. This approach is typical for the economic theory of transaction costs; at the same time, being the second best solution to the problem, since control is associated with costs, incentives can be distorted, and third-party coercion requires that the agent's actions be observable and controllable.

Using the implicit social contract. These include, for example, the self-fulfilling agreement model of Lester Telser (Lester Greenspan Telser, born in 1931) and the reputation model. These decisions require interaction to be repetitive or long-term.

Repetitive interaction. This solution proposes two strategies for punishing players who are uncooperative, the "tit for tat" strategy and the "trigger" strategy.

In accordance with the tit-for-tat strategy, the players cooperate in the first round, and then choose the strategy that the other player adhered to in the previous round of the game.

Under the trigger strategy, the player cooperates until the other player is uncooperative, and then the first player is uncooperative in all subsequent rounds of the game.

Under both strategies, the players have an incentive to cooperate as long as they expect cooperation to continue in the next period, the benefit from cooperation is significant, and the benefit from cheating is not too great.

The problem with the economic approach to trust lies in the fact that by changing the structure of the game in such a way as to create an incentive for players to cooperate, economists eliminate the vulnerability of an economic agent to deception by a partner, and thereby eliminate the very need for trust.

If I know that my partner has no incentive to abuse my trust, can I say that I trust him?

By definition, those who trust are vulnerable and cannot do anything to change the situation.

Therefore, a distinction still seems to be made between "trust" created through incentives and trust applied in situations in which players remain vulnerable to the actions and choices of others.

This distinction is important because economists cannot always explain the role of trust in economic exchange, especially in situations where there are no incentives to justify trust.

So, O. Williamson distinguishes between "trust based onthose"(calculative trust) and "personal trust"(personal trust).

Trust based on calculation, O. Williamson considers as a clear contradiction, involving a rational assessment of the benefits and costs of trust.

Personal trust is not based on conscious calculation, but is guaranteed only by special personal relationships, which would be seriously damaged if calculation were allowed.

The institutional environment has a great influence on the choice of the form of the contract, and first of all on the need for certain guarantees in the implementation of specific investments.

Transactions that are executed in one institutional environment may not be viable in another environment.

A society with a high level of trust will be less likely to resort to vertical integration to guarantee specific investments than a society with a low level of trust.

In America, the level of trust is low, because economic agents are used to relying on a developed legal system, therefore, with the growth of asset specificity in America, firms are more likely to resort to vertical integration than European (German, Scandinavian) or Japanese companies, which, under similar circumstances, will prefer a neoclassical contract.

A specific resource is a resource that, if the transaction is interrupted, cannot be used in other projects without compromising its economic value. The degree of specificity of a resource can be judged by how much the value of the resource will be reduced if it is used elsewhere.

The following types of resource specificity* are distinguished in the literature:

1. Site specificity is associated with too much cost of moving a resource. It is possible to assume the presence of location specificity if the enterprises are located in geographical proximity to each other. An example of location specificity would be a power plant built in close geographic proximity to a coal mine. This location saves on transport costs and the costs associated with storing coal reserves. After the IPO, the parties will maintain bilateral relations throughout the life of the power plant. Steel production and rolling mills are also built in close proximity to each other. Here, savings are achieved due to the absence of the need to heat the steel.

2. Physical asset specificity. Physical capital specificity is said to be when a party or one of the parties has invested in equipment with certain characteristics that has less value when used in other projects. An example is the furnaces of power plants, which are usually designed for a certain type of coal (with a certain moisture content, sulfur content, chemical composition). Deviation from the type of coal for which this equipment is designed, due to a break in relations with its supplier, will require complex work to reconfigure the furnace, which is associated with significant resource costs.

3. Specificity of human capital (human asset specificity). The specificity of human capital is said to be when, as a result of on-the-job training, workers accumulate special skills that allow them to produce goods and services more efficiently than the same workers do, but do not have specific human capital. An example of specific human capital is the manager's knowledge of the administrative features and management culture of the firm in which he has worked for many years. This specific knowledge is of value only to the given firm and depreciates if the manager loses his job in the given firm, for example, as a result of a hostile takeover of the company he manages. The concept of the specificity of human capital can also refer to the relational skills that arise when working as a team, when all team members know each other well.

4. Specificity of target or "dedicated" assets (dedicated assets). Here we are talking about an investment in general-purpose resources, which, however, may be intended for a single user. The supplier makes this investment in the hope of selling a significant amount of product to a specific customer. If the contract is terminated, then the supplier has significant stocks, since there is no demand for them from other buyers. The same situation can develop on the buyer's side. If he ordered a large number of products and did not receive them, and cannot find the same number of products in the market.

5. Temporal specificity. This is a characteristic of investments where production coordination is essential (for example, in the production of broiler chickens, their freshness and growing time are important, and this complicates the coordination of production; the prompt supply system becomes a decisive success factor here). The value of resources not delivered on time is significantly reduced. This kind of specificity was highlighted by Masten, Meehan, and Snyder in their analysis of the costs of organizing naval shipbuilding in order to highlight the centrality of time and coordination in this activity.

6. Specificity of reputation, trademark (brand name specificity). It is a non-returnable investment in building a reputation or brand that will lose its value if the firm's products or services are of poor quality.