Ag Econ 9510 Economics of
Agribusiness Firm
Fall 2006
Monday and Wednesday, 1:00-2:15pm, 320 Mumford
Ref #11495 (3 credit hours)
Professor Harvey James
Office: 146 Mumford Hall
Phone: (573) 884-9682
E-mail: HJames@missouri.edu
Webpage: http://dass.missouri.edu/Faculty/HJames
Texts and
(1) Gary Miller, Managerial
Dilemmas: The Political Economy of Hierarchy,
(2) Oliver Williamson and
Sidney Winter, The Nature of the Firm: Origins, Evolution, and Development,
(3) Harvey James (ed.), New Ideas in Contracting and Organizational
Economics Research, Nova Science Publishers, 2005, hereafter New Ideas. (Click here to order from Amazon.com). Recommended
(4) Articles and other
assigned readings, as scheduled. These are available as PDF files in the
"Course Documents" section of our course website on Blackboard.
Suggested Texts and
Supplemental Sources:
Brickley, Smith, and Zimmerman, Managerial Economics and
Organizational Architecture, 3/e, Irwin/McGraw-Hill, 2003.
Coase, The Firm, the Market and the Law,
Milgrom and Roberts, Economics, Organization &
Management, Prentice-Hall, 1992.
Williamson, The Economic
Institutions of Capitalism, Free Press, 1985.
Annotated Bibliography on
Transaction Cost Economics at http://dass.missouri.edu/Faculty/HJames/TCE.
Journals: Journal of Economic Behavior
and Organization; Journal of Institutional and Theoretical Economics; Journal
of Law and Economics; Journal of Law, Economics, and Organization; Managerial
and Decision Economics
Course Description: This course presents theories based on transaction
cost economics and related concepts in the study of intra-firm organization,
firm boundaries, and the structure of inter-firm transactions. Building on the
foundation of organizational and institutional economics developed in Ag Econ
8050, this course provides an in-depth study of alternative theories of firm
existence and structure, as well as an analysis of empirical work in the field.
Applications will be made to the institutional, technological and
organizational characteristics peculiar to agribusiness and how those
characteristics shape the implications of existing theories. Prerequisite: Ag
Econ 8050 and graduate standing.
Course Overview and
Evaluation: The class will include a
balance of lecture and group discussion of the readings. In addition, students
will have opportunities to present some of the reading material in class,
either individually and in small groups. For this reason, I fully expect you to
read the assigned articles prior to class; in fact, this will be made a
requirement.
Your grade for the course will
be based on class participation and other assignments, summaries of assigned
readings, a theoretical or empirical paper with presentation, and a final
examination. The final exam will involve applying the concepts discussed in the
course in an applied research context. Grades will be based on the customary
ranges: 90s is "A," 80s is "B," and 70s is "C."
The individual items are weighted as follows:
|
Class participation |
20% |
|
Summaries of readings |
20% |
|
Term paper (due TBD) |
40% |
|
Final exam (on TBD) |
20% |
|
Total |
100% |
Summaries of
Term Paper:
PhD Students
You are required to write an
original theoretical or empirical paper that is broadly related to the
transaction cost economics topics discussed in class. A theoretical paper will
offer and justify a new theory that results in testable hypothesis (that can be
examined in future research). An empirical paper will test a proposed
hypothesis using actual data. You decide on either the theoretical or empirical
paper. If you choose to write an empirical paper, one suggestion is to reproduce
empirical results previously published in an academic journal. Use this
opportunity to explore possible dissertation or thesis topics or chapters. If
you write a "good" paper, I will encourage you to submit the paper
for publication in an academic journal.
MA Students
You are required to write a literature review in a subject broadly related to
the transaction cost literatures and discussions we have in class. The
literature review should be modeled after the reviews found in journals such as
the Journal of Economic Literature and the Journal of Economic Studies. In a
literature review, you describe the published research that relates to a common
theme. Then, you summarize the literature, explaining
what is generally known, what is not known, and what needs to be known. Often, researchers will provide
"directions" for future work in their conclusions. You should do
this.
All Papers
Be sure to include a concise abstract. In addition to grading the paper for
content, I will also consider presentation – that is, exposition, grammar,
spelling, etc. There is no paper length requirement. Papers should be typed
(with a word processor), double-spaced and use either 11 or 12 point font.
During the last week of the
semester you will be required to make a presentation of your research to the
class. Think of this as a presentation you would make at an academic
conference. Therefore, you should prepare overheads and treat the presentation
in a "formal" manner (i.e., don't sit at your desk and wave your arms
around as you speak). Your presentation is not only good practice for you but
also a good opportunity for your peers to learn what you are interested in and
to offer suggestions and feedback on your research.
Academic Honesty: Academic honesty is fundamental to the activities
and principles of a university. All members of the academic community must be
confident that each person's work has been responsibly and honorably acquired,
developed, and presented. Any effort to gain an advantage not given to all
students is dishonest whether or not the effort is successful. The academic
community regards academic dishonesty as an extremely serious matter, with
serious consequences that range from probation to expulsion. When in doubt
about plagiarism, paraphrasing, quoting, or collaboration, consult me,
the course instructor.
Plagiarism – which is using
another's words or ideas without acknowledging the source – is unethical, against
school policy, and will not be tolerated in this class. If I find any evidence
that you have plagiarized, you will fail (i.e., receive a grade of zero on) the
assignment. Additionally, I will report the incident to the Vice Provost for
Undergraduate Studies (room 111 Jesse) and the department chair. Your paper
must be written in your own words. Do NOT copy and/or paste into your paper any
part of another's written work unless you provide a complete citation to that
work!
Disabilities: If you have special needs as addressed by the
Americans with Disabilities Act (ADA) and need assistance, please notify the
Office of Disability Services, A048 Brady Commons, 882-4696 or me,
the course instructor, immediately. Reasonable efforts will be made to
accommodate your special needs.
Disclaimer: This syllabus is subject to change to facilitate
instructional and/or student needs.
Tentative Reading and Discussion Schedule:
The following schedule indicates the topics and
readings for our class meetings. Articles indicated by an asterisk (*) are
required reading. Some are in the textbook, The
Nature of the Firm, (denoted as NF).
All others are as PDF or Microsoft Word DOC files in the "Course
Documents" section of Blackboard, unless noted with a "^" (which
means the file is not available on Blackboard). Readings denoted by a plus sign
(+) are highly recommended and will likely be referred to in class.
I expect you to read the articles carefully
before class.
Week 1 - Aug 21, 23: Coase and the theory
of the firm
* Ronald Coase, "The Nature of the Firm," Economica,
1937. Reprinted in NF, 18-33,
+ Ronald Coase, "The Nature of the Firm: Origin, Meaning,
Influence," Journal of Law and
Economics, 1988. Reprinted in NF, 34-74.
* Harold Demsetz, "The Theory of the Firm Revisited," Journal of Law, Economics and Organization,
1988. Reprinted in NF, 159-178.
Sydney
Winter, "On Coase, Competence, and the
Corporation," Journal of Law,
Economics and Organization, 1988. Reprinted in NF, 179-195.
* Scott
Masten, "A Legal Basis for the Firm," Journal of Law, Economics and Organization, 1988. Reprinted in NF, 196-212.
+
Harvey James, "Employment Contracts, U.S. Common Law, and the Theory of
the Firm," International Journal of
the Economics of Business, 10(1), 2003, 49-65.
Steven
Cheung, "The Contractual Nature of the Firm", Journal of Law and Economics, 26, 1983, 1-21.
Week 2 – Aug
28, 30: Williamson’s TCE
*
Oliver Williamson, "Transaction-Cost Economics: The Governance of
Contractual Relations," Journal of
Law and Economics, 22(2), 1979, 233-261.
*
Oliver Williamson, “Vertical Integration: Theory and Policy,” The Economic Institutions of Capitalism,
1985, chapter 4, 1985, 85-102.
*
Oliver Williamson, "The Logic of Economic Organization," Journal of Law, Economics and Organization,
1988. Reprinted in NF, 90-116.
Oliver
Williamson, "The Vertical Integration of Production: Market Failure
Considerations," American Economic
Review, Papers and Proceedings, 61, 1971, 112-123.
+ Oliver
Williamson, "Contractual Man," The
Economic Institutions of Capitalism, 1985, chapter 2, 43-67.
Oliver
Williamson, "The Limits of Firms: Incentive and Bureaucratic
Features," The Economic Institutions
of Capitalism, 1985, chapter 6, 1985, 131-162.
Oliver
Williamson, "Comparative Economic Organization: The Analysis of Discrete
Structural Alternatives," Administrative
Science Quarterly, 36(2), 1991, 269-296.
+
Harvey James, "Separating Contract from Governance," Managerial and Decision Economics, 21, 2000,
47-61.
^ Posner-Coase-Williamson exchange
in Journal of Institutional and Theoretical Economics, 149, 1993,
73-121.
Monday, September 4, Labor Day. No classes
Week 3 – Sep 6: The pillars
* Michael
Jensen and William Meckling, "Theory of the
Firm: Managerial Behavior, Agency Costs, and Ownership Structure," Journal of Financial Economics, 3, 1976,
305-360.
* Armen Alchian and Harold Demsetz, "Production, Information Costs, and Economic
Organization," American Economic
Review, 62, 1972, 777-795.
* Benjamin
Klein, Robert Crawford, and Armen Alchian,
"Vertical Integration, Appropriable Rents and the Competitive Contracting
Process," Journal of Law and
Economics, 21, 1978, 297-326.
Week 4 – Sep 11: Alternative
theories of the firm
* Robert Gibbons, “Four Formal(izable)
Theories of the Firm?” Journal of
Economic Behavior and Organization, 58(2), 2005, 200-245.
Property
rights and incomplete contracting
*
Oliver Hart, "Incomplete Contracts and the Theory of the Firm," Journal of Law, Economics and Organization,
1988. Reprinted in NF, 138-158.
Oliver Hart
and John Moore, "Property Rights and the Nature of the Firm," Journal
of Political Economy, 98,
1990, 1119-58.
Agency
theory
Eugene Fama, "Agency Problems and the Theory of the Firm,"
Journal of Political Economy, 88(2),
1980, 288-307.
Resource-based
theory
+ Anoop Madhok,
"Reassessing the Fundamentals and Beyond: Ronald Coase,
the Transaction Cost and Resource-based Theories of the Firm and the
Institutional Structure of Production," Strategic Management
Journal, 23, 2002, 535-550.
Birger Wernerfelt, "A Resource-Based View of the Firm," Strategic Management Journal 5, 1984, 272-80.
Kirsten Foss and Nicolai
Foss, “Value and Transaction Costs: How the Economics of Property Rights
Furthers the RBV,” Strategic Management Journal, 26, 2005, 541-553.
Relational
contracting
George
Baker, Robert Gibbons, and Kevin Murphy, "Relational Contracts and the
Theory of the Firm," Quarterly Journal of Economics 117(1), 2002,
39-84.
Week 4 – Sep 13: Entrepreneurship,
evolution, and the firm (with Peter Klein)
* Nicolai Foss and Peter Klein,
"Entrepreneurship and the Economic Theory of the Firm: Any Gains from
Trade?" in Rajshree Agarwal,
Sharon A. Alvarez, and Olav Sorenson, eds., Handbook
of Entrepreneurship Research: Disciplinary Perspectives, New York:
Springer, 2005, 55-80.
Nicolai Foss and Ibuki Ishikawa, “Towards
a Dynamic Resource-based View,” Organization
Studies, forthcoming.
Ulrich Witt, "Evolutionary Economics," Papers on Economics and
Evolution 2006-05, Max Planck Institute of Economics, 2006.
Week 5 – Sep 18, 20: Boundaries
and vertical integration (with Peter Klein)
Vertical
Boundaries
* Paul Joskow, "Vertical Integration," in C. Menard and
M. Shirley (eds.), Handbook of New Institutional Economics, Springer, 2005.
* Peter
Klein, "The Make-or-Buy Decision: Lessons from Empirical
Studies," in C. Menard and M. Shirley (eds.), Handbook
of New Institutional Economics, Springer 2005.
^ Michael Whinston, "On the Transaction Cost Determinants of
Vertical Integration," Journal of Law, Economics, and Organization,
19, 2003.
Horizontal
Boundaries
* Claude
Menard and Peter Klein, "Organizational Issues in the Agrifood
Sector: Toward a Comparative Approach," American Journal of Agricultural Economics, 86, 2004, 750-55.
Gregor
Andrade and Erik Stafford, "Investigating the Economic Role of
Mergers," Journal of Corporate
Finance 10, 2004, 1-36.
Gregor
Andrade, Mark Mitchell, and Erik Stafford, "New Evidence and Perspectives
on Mergers," Journal of Economic
Perspectives 15, 2001, 103-20.
^ Symposium
on network externalities (articles by Katz and Shapiro, Bensen
and Farrell, and Liebowitz and Margolis), Journal of Economic Perspectives, Spring
1994.
Conglomerates
* Oliver
Williamson, Markets and Hierarchies:
Analysis and Antitrust Implications (New York: Free Press, 1975), chapters
8 and 9.
Jose Manuel
Campa and Simi Kedia, "Explaining the Diversification Discount," Journal of Finance, 57, 2002, 1731-1762.
Mitchell
Berlin, "Jack of All Trades? Product Diversification in Nonfinancial Firms," Federal Reserve Bank
of
Larry Lang
and Reni Stulz,
"Tobin's Q, Corporate Diversification, and Firm Performance," Journal
of Political Economy 102, 1994, 1248-80.
Belin Villalonga, "Research Roundtable Discussion: The
Diversification Discount," FEN-Educator Series, April 24, 2003.
Week 6 – Sep
25, 27: Empirical TCE
Empirical
evidence
* Paul Joskow, "Asset Specifity and
the Structure of Vertical Relationships: Empirical Evidence," Journal of Law, Economics and Organization,
1988. Reprinted in NF, 117-137.
* Richard
Carter and Geoffrey Hodgson, “The Impact of Empirical Tests on Transaction Cost
Economics on the Debate on the Nature of the Firm,” Strategic Management
Journal, 27, 2006, 461-476.
Christopher
Boerner and Jeffrey Macher,
"Transaction Cost Economics: An Assessment of Empirical Research in the
Social Sciences," working paper,
^
Howard Shelanski and Peter Klein, "Empirical
Research in Transaction Cost Economics: A Review and Assessment," Journal
of Law, Economics and Organization 11(2), 1995, 335-61.
Methodological
issues
*
Scott Masten, James Meehan, and Edward Snyder, "The Costs of
Organization," Journal of Law,
Economics, and Organization, 7, 1991, 1-25.
* Anne
Yvrande-Billon and Stephane Saussier,
"Do Organization Choices Matter? Assessing the Importance of Governance
Through Performance Comparisons," in H. James, (ed.), New Ideas in Contracting and Organizational Economics Research,
+ Michael
Sykuta, "New Institutional Econometrics: The Case of Contracting and
Organizations Research," in J.M. Glachant and E. Brousseau,
(eds.), New Institutional Economics: A Textbook,
Robert
Dahlstrom and Arne Nygaard,
"Measurement of Transaction Costs and Falsification Criteria: Toward
Future Directions in Empirical Research on Transaction Cost Theory," in H.
James, (ed.), New Ideas in Contracting
and Organizational Economics Research,
Week 7 – Oct
2, 4: Corporate governance (with
Mike Sykuta)
* Andrei Shleifer and Robert Vishny,
"A Survey of Corporate Governance," Journal of Finance, 52,
1997, 737-783.
* Benjamin Hermalin and Michael Weishbach,
"Boards of Directors as an Endogenously Determined Institution: A Survey
of the Economic Literature," Economic Policy Review, April 2003,
7-26.
* Eric Helland and Michael Sykuta, "Regulation and the
Evolution of Corporate Boards: Monitoring, Advising or Window Dressing?" Journal
of Law and Economics, 47, April 2004, 167-193.
Week 8 – Oct
9, 11: Managerial Dilemmas I
TBD
Week 9 – Oct
16, 18: Managerial Dilemmas II
TBD
Weeks 10 –
Oct 23, 25: Managerial Dilemmas III
TBD
Week 11 – Oct 30, Nov 1: Organizational trust and social capital I
* Stewart
Macaulay, "Non-Contractual Relations in Business: A Preliminary
Study," American Sociological Review,
28(1), 1963, 55-67.
* Oliver
Hart, "Norms and the Theory of the Firm," HIER
working paper no. 1923, 2001.
* Gary
Miller, “Why is Trust Necessary in Organizations?” in K.S.
Cook (ed.), Trust in Society, New
York, NY: Russell Sage Foundation, 2001, 307-331.
Week 12 – Nov 6, 8: Organizational
trust and social capital II
* Harvey
James, "On the Reliability of Trusting," Rationality & Society, 14(2), 2002, 229-256.
* Kurt
Annen, "Social Capital Investment in Organizations," in H. James,
(ed.), New Ideas in Contracting and
Organizational Economics Research, New York, Nova Science Publishers, 2005,
chapter 2, 19-32.
Harvey James and Michael Sykuta, “Property Right and Organizational Characteristics of
Producer-owned Firms and Organizational Trust,” Annals of Public and
Cooperative Economics, 76(4), 2005, 545-580.
Bart Nooteboom, Hans Berger, and Niels
Noorderhaven, “Effects of Trust and Governance on
Relational Risk,” Academy of Management Journal, 40(2), 1997, 308-338.
Week 13 – Nov 13, 15: Incentives
and motivation
* Steven
Kerr, "On the Folly of Rewarding A, While Hoping for B," Academy of Management Journal, 18(4),
1975, 769-783.
* Bruno
Frey, "Does Monitoring Increase Work Effort? The Rivalry With Trust and
Loyalty," Economic Inquiry, 31,
1993, 663-670.
Robert
Gibbons, “Incentives in Organizations,” Journal
of Economic Perspectives, 12(4), 1998, 115-132.
+ Edward Lazear, “The Power of Incentives,” American Economic Review, 90(2), 2000, 410-414.
* Harvey
James, “Why Did You Do That? An Economic Examination of the Effect of Extrinsic
Compensation on Intrinsic Motivation and Performance,” Journal of Economic Psychology,
26(4), 2005, 549-566.
+ Sherwin
Rosen, "Transaction Costs and Internal Labor Markets," Journal of Law, Economics and Organization,
1988. Reprinted in NF, 75-89
Monday, November 20, and Wednesday, November 22,
Thanksgiving Break. No classes.
Week 14 – Nov
27, 29: Cooperative theory (with
Mike Cook)
*
Richard Phillips, "Economic Nature of the Cooperative Association", Journal
of Farm Economics, 35(1), 1953, 74-87.
*
Peter Helmberger and Sidney Hoos,
"Cooperative Enterprise and Organization Theory", Journal of Farm
Economics, 44(2), 1962, 275-90.
*
Clare LeVay, “Agricultural Co-operative Theory,” Journal of Agricultural Economics,
34(1), 1983, 1-44.
*
Jeffrey Royer, "Cooperative Organizational Strategies: A Neo-Institutional
Digest", Journal of Cooperatives 14, 1999, 44-67.
Michael
Cook, “The Future of U.S. Agricultural Cooperatives: A Neo-Institutional
Approach,” American Journal of
Agricultural Economics, 77(December), 1995, 1153-1159.
Sykuta, Michael, and Fabio Chaddad,
"Putting Theories of the Firm in Their Place: A Supplemental Digest of the
New Institutional Economics," Journal of Cooperatives, 1999, 68-76.
Week 15 – Dec
5, 7: Student presentations