Networks and transaction costs

TY - JOUR

T1 - Networks and transaction costs

AU - Henning, Christian H.C.A.

AU - Henningsen, Géraldine

AU - Henningsen, Arne

PY - 2012/1/1

Y1 - 2012/1/1

N2 - Self-governance among a group of actors with repeated exchange among different partners can work if communication within the group permits a collective memory of cheating and group members punish cheaters by refusing to trade with them. Estimation results based on a sample of Polish farms imply a significant influence of social network structures on farms' transaction costs. Assume business occurs in separated small local trading worlds. In this case, it follows that small and dense ego-centric business networks increase commitment power of firms and hence reduce c.p. their transaction costs. While density lowers transaction costs on input markets and raises transaction costs on output markets, the opposite effect can be observed for network size. By contrast, for locally traded goods, firms with dense and locally clustered business networks face comparatively low transaction costs, since they can better constrain their local business partners via direct contacts to their local clients.

AB - Self-governance among a group of actors with repeated exchange among different partners can work if communication within the group permits a collective memory of cheating and group members punish cheaters by refusing to trade with them. Estimation results based on a sample of Polish farms imply a significant influence of social network structures on farms' transaction costs. Assume business occurs in separated small local trading worlds. In this case, it follows that small and dense ego-centric business networks increase commitment power of firms and hence reduce c.p. their transaction costs. While density lowers transaction costs on input markets and raises transaction costs on output markets, the opposite effect can be observed for network size. By contrast, for locally traded goods, firms with dense and locally clustered business networks face comparatively low transaction costs, since they can better constrain their local business partners via direct contacts to their local clients.

U2 - 10.1093/ajae/aar099

DO - 10.1093/ajae/aar099

M3 - Journal article

SN - 0002-9092

VL - 94

SP - 377

EP - 385

JO - American Journal of Agricultural Economics

JF - American Journal of Agricultural Economics

IS - 2

ER -