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Measuring the Influence of Networks on Transaction Costs Using a Non-parametric Regression Technique

  • Géraldine Henningsen

    ()

    (DTU Management Engineering, Technical University of Denmark)

  • Arne Henningsen

    ()

    (Department of Food and Resource Economics, University of Copenhagen)

  • Christian H.C.A. Henning

    ()

    (Institute of Agricultural Economics, Christian-Albrechts University Kiel)

All business transactions as well as achieving innovations take up resources, subsumed under the concept of transaction costs. One of the major factors in transaction costs theory is information. Firm networks can catalyse the interpersonal information exchange and hence, increase the access to non-public information so that transaction costs are reduced. Many resources that are sacrificed for transaction costs are inputs that also enter the technical production process. As most production data do not distinguish between these two usages of inputs, high transaction costs result in reduced observed productivity. We empirically analyse the effect of networks on productivity using a cross-validated local linear non-parametric regression technique and a data set of 384 farms in Poland. Our empirical study generally supports our hypothesis that networks affect productivity. Large and dense trading networks and dense information networks and household networks have a positive impact on a farm’s productivity. A bootstrapping procedure confirms that this result is statistically significant.

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File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2013/IFRO_WP_2013_11.pdf
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Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series IFRO Working Paper with number 2013/11.

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Length: 20 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:foi:wpaper:2013_11
Contact details of provider: Web page: http://www.ifro.ku.dk/english/
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  1. Henning, Christian H.C.A. & Henningsen, Geraldine & Henningsen, Arne, 2011. "Networks and Transaction Costs," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114549, European Association of Agricultural Economists.
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