This link has been bookmarked by 1 people . It was first bookmarked on 08 Oct 2008, by Wesley Shu.
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08 Oct 08
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Bounded rationality implies that human actors as well as firms are incapable of perfect contracting (Simon 1947).
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when transactions involve highly specific assets, transaction costs are likely to be lower in a hierarchy than in a market.
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Bounded Rationality
In nonintegrated situations, close relationships (Heide and John 1990) may enjoy commonalties in knowledge and modes of communication (Conner and Prahalad 1996) that permit more efficient adaptation than does market governance.
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Opportunism
Guanxi could provide some assurance of exchange partner’s behavior especially when opportunistic behavior could appear. The news of loss of face with ant exchange partner would travel through the guanxi network thus opportunistic behavior of an exchange partner could extend to the entire guanxi network. The threat of expulsion from the well-developed guanxi network provides increased assurance that one’s exchange partner will not act in an opportunistic manner.
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The news of loss of face with ant exchange partner would travel through the guanxi network thus opportunistic behavior of an exchange partner could extend to the entire guanxi network. The threat of expulsion from the well-developed guanxi network provides increased assurance that one’s exchange partner will not act in an opportunistic manner.
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The current massive institutional changes happening in China increase the degree of uncertainty (Nee 1992).
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Guanxi practices’ relation to the social norms of mianzi and renqing helps to develop the judgment of potential business partners.
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