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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Géraldine Henningsen & Arne Henningsen & Christian H.C.A. Henning, 2013. "Measuring the Influence of Networks on Transaction Costs Using a Non-parametric Regression Technique," IFRO Working Paper 2013/11, University of Copenhagen, Department of Food and Resource Economics.
  • Handle: RePEc:foi:wpaper:2013_11
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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2013/IFRO_WP_2013_11.pdf
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    References listed on IDEAS

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    1. Christian H.C.A. Henning & Géraldine Henningsen & Arne Henningsen, 2012. "Networks and Transaction Costs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 377-385.
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    More about this item

    Keywords

    Information networks; Transaction Costs; Non-parametric estimation; Productivity analysis;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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