Unlocking value from machines: business models and the industrial internet of things

In this article we argue that the Industrial Internet of Things (IIoT) offers new opportunities and harbors threats that companies are not able to address with existing business models. Entrepreneurship and Transaction Cost Theories are used to explore the conditions for designing nonownership business models for the emerging IIoT with its implications for sharing uncertain opportunities and downsides, and for transforming these uncertainties into business opportunities. Nonownership contracts are introduced as the basis for business model design and are proposed as an architecture for the productive sharing of uncertainties in IIoT manufacturing networks. The following three main types of IIoT-enabled business models were identified: (1) Provision of manufacturing assets, maintenance and repair, and their operation, (2) innovative information and analytical services that help manufacturing (e.g., based on artificial intelligence, big data, and analytics), and (3) new services targeted at end-users (e.g., offering efficient customization by integrating end-users into the manufacturing and supply chain ecosystem)

The Impossibility of a Perfectly Competitive Labor Market

Using the institutional theory of transaction cost, I demonstrate that the assumptions of the competitive labor market model are internally contradictory and lead to the conclusion that on purely theoretical grounds a perfectly competitive labor market is a logical impossibility. By extension, the familiar diagram of wage determination by supply and demand is also a logical impossibility and the neoclassical labor demand curve is not a well-defined construct. The reason is that the perfectly competitive market model presumes zero transaction cost and with zero transaction cost all labor is hired as independent contractors, implying multi-person firms, the employment relationship, and labor market disappear. With positive transaction cost, on the other hand, employment contracts are incomplete and the labor supply curve to the firm is upward sloping, again causing the labor demand curve to be ill-defined. As a result, theory suggests that wage rates are always and everywhere an amalgam of an administered and bargained price. Working Paper 06-0

The theory of the firm and its critics: a stocktaking and assessment

Includes bibliographical references."Prepared for Jean-Michel Glachant and Eric Brousseau, eds. New Institutional Economics: A Textbook, Cambridge, Cambridge University Press.""This version: August 22, 2005."Since its emergence in the 1970s the modern economic or Coasian theory of the firm has been discussed and challenged by sociologists, heterodox economists, management scholars, and other critics. This chapter reviews and assesses these critiques, focusing on behavioral issues (bounded rationality and motivation), process (including path dependence and the selection argument), entrepreneurship, and the challenge from knowledge-based theories of the firm

Institutional Export Barriers on Exporters from Emerging Markets: Evidence from China

The emerging markets have become the increasingly important trading nations in the global economy. Given its significance to practitioners and policymakers, export barriers has been the popular topic in the international business studies. However, research about export barriers caused by the local institutions are under developed, though institutional voids and institutional inefficiency are reported as the major determinants for business development in emerging markets. This paper aims to fill in this gap by exploring the institutional export barriers in emerging markets. Based on existing studies on export barriers and institutional perspective, a conceptual framework is initially developed by separating formal and informal institutional export barriers. Then three specific institutional export barriers are identified, including government policy, weak legal system and informal and personal networks. In the meanwhile, this paper sheds light on how the institutional export barriers are developed and obstruct exporting in emerging markets

Transaction costs: an empirical analysis of their relationship with investment and foreign direct investment

As stated by the New Institutional Economics theory, transaction costs play a relevant role in economics and, according to the extent of such costs, agents make investment decisions. Actually, transaction costs may represent a disincentive to entrepreneurship. This work aims to verify whether transaction costs are related to investment rate and foreign direct investment rate (FDI) in different business environments. The results suggest that foreign investors do not have precise information about other countries as domestic investors do; as it is observed, only the relation between transaction costs and investment rate is significant. Furthermore, there is evidence that the business environments of BRIC countries are less developed when compared to business environments of other countries in the studyDe acordo com a teoria desenvolvida pela Nova Economia Institucional, os custos de transação têm um papel relevante na economia e de acordo com a extensão desses custos os agentes tomam decisões de investimento. Dessa forma, os custos de transação também representam um desestímulo ao empreendedorismo. Este trabalho tem como objetivo verificar se os custos de transação têm relação com variáveis como a taxa de investimento e o investimento direto estrangeiro (IDE). Os resultados encontrados sugerem que os investidores estrangeiros não possuem informações acuradas sobre os outros países, ao contrário do que ocorre com os investidores nacionais. Dessa forma, os custos de transação só são significativos quando a variável dependente analisada é a taxa de investimento. Além disso, há evidência de que os ambientes de negócios observados nos países do grupo BRIC estão menos desenvolvidos em comparação com outros países presentes no estudoComo se ha señalado por la teoría de la Nueva Economía Institucional, los costos de transacción desempeñan un papel relevante en la economía y de acuerdo con la extensión de estos costos los agentes toman decisiones de inversión. Así pues, los costos de transacción también representan un desincentivo a la iniciativa empresarial. Este estudio pretende verificar si los costos de transacción tienen relación con variables como la tasa de inversión y la tasa de inversión extranjera directa (IED). Los resultados sugieren que los inversores extranjeros no tienen información precisa acerca de otros países, a diferencia de lo que sucede con los inversores nacionales. Por lo tanto, los costos de transacción son sólo significativos cuando la variable dependiente que se analiza es la tasa de inversión. Además, existe evidencia de que los entornos empresariales observados en los países BRIC están menos desarrollados en comparación con los entornos empresariales de otros países presentes en el estudi

Remediable institutional alignment and water service reform: Beyond rational choice

A growing body of empirical evidence fails to support rational choice expectations of superior private sector efficiency in the urban water sector. Drawing on Oliver Williamson’s work on comparative institutional analysis, I suggest that institutional adaptability explains the efficiency and effectiveness of the public sector relative to the private sector. Under private sector participation, lowly remediable institutional adaptability favours the deployment of asymmetric power and the production of outcomes unaligned to reform objectives. Conversely, institutions supporting public operations are designed to facilitate the achievement of collective goals. This makes the alignment of individual attitudes, resources and institutions under in-house service provision less resilient to sustainability-oriented change. Remediable institutional alignment undergirds the comparative advantage of public water operations, as more ample opportunities are provided for compliance, allocative efficiency and adaptive performance. I thus call for a critical realist account of the outcomes of water service reform, free of rational choice dogma