This article builds a theoretical framework to help explain governance patterns in global value chains. It draws on three streams of literature – transaction costs economics, production networks, and technological capability and firm-level learning – to identify three variables that play a large

to the highest value use without substantial risk of loss through moral hazard, adverse selection, or transactions costs { are an essential catalyst of economic growth. Empirical work seems consistent with this argument. For example, on the

when inflation is high and unpredictable. The academic literature contains a lot of theoretical work on the costs of inflation, as reviewed recently by Briault (1995). This analysis provides a presumption that inflation is a bad idea, but the case is not decisive without supporting empirical findings

This paper briefly reviews the contemporary literature on relationship banking. We start out with a discussion of the raison d’être of banks in the context of the financial intermediation literature. From there we discuss how relationship banking fits into the core economic services provided

. Thus, we examine how changes in credit spreads respond to proxies for both changes in the probability of future default and for changes in the recovery rate. Separately, recent empirical studies find that the corporate bond market tends to have relatively high transactions costs and low volume. 1

not experience an adverse economic shock, financial distress costs are negligible. MANY OF THE HIGHLY LEVERAGED TRANSACTIONS ~HLTs! completed in the latter half of the 1980s subsequently defaulted on debt payments, filed for bankruptcy, and, in general, encountered financial distress. Kaplan and Stein ~1993a

precondition for this strong version of the hypothesis is that information and trading costs, the costs of getting prices to reflect information, are always 0 (Grossman and Stiglitz (1980)). A weaker and economically more sensible version of the efficiency hypothesis says that prices reflect information

action costs, leading to more efficient, "friction-free" markets. Table 1. Functions of a market Internet Economics Matching buyers and sellers . Determination of product offerings - Product features offered by sellers - Aggregation of different products . Search (of buyers

their complementarity in practice. Copyright © 2002 John Wiley & Sons, Ltd. Transaction cost economics (TCE) has emerged as a common framework for understanding how managers craft governance arrangements. The general proposition of this literature is that managers

for ideas from Transaction Cost Economics. 1.