2000 Fiscal Year Final Research Report Summary
THE EFFECTIVENESS OF THE AGENCY THEORY AND THE TRANSACTION COST THEORY FOR ORGANIZATION
| Project/Area Number |
10630116
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Business administration
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| Research Institution | KYUSHU UNIVERSITY |
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Principal Investigator |
OKABE Tetsuo Kyushu Univ., Faculty of Economics, Professor, 大学院・経済学研究院, 教授 (10127996)
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| Project Period (FY) |
1998 – 2000
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| Keywords | internal organization / principal / agents / incentive system / transaction costs / contract / governance structure / sharking |
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| Research Abstract |
When internal organization is consisted from two tiers of hierarchy such as principal and agents, the hiper powered organization which adopts incentive system produces high productivity. To motivate agents principal needs to design adequate incentive systems. To prevent sharking and inefficiency monitoring system and internal audits are needed. Internal organization or integration reduces transaction costs and financial risks, or both, and it produces an outcome that improves overall industry's profitability. Economic institutions such as the firm have the main purpose and effect of economizing on transaction. The concept of asset specificity is used as a key factor to explain departures from governance by spot market transactions. If bargaining parties cannot costlessly contract on the specific investments, transaction costs which are associated with writing, monitoring, and enforcing contracts are needed to prevent sharking. Internal organization or vertical integration is viewed as a method for overcoming some of the problems associated with imperfect long term contracts, although vertical integration may confront costs of its own as well. Then the ultimate choice of governance structure requires balancing the costs and benefits of these alternative governance systems. As the information technology economizes transaction costs organization form will be changed. We can analyze various organization forms using transaction cost theory and agency theory. Network is sustained and gets competitive benefits whenever it economizes transaction costs effectively and efficiently.
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