Opportunism

From Geography

Opportunism is one of the three most important sources of transaction costs. These three sources are; asymmetric information, asset specificity and opportunism. With opportunism strategic thinking and guile in exchanges is possible (Williamson, 1975). Opportunism means that parties (for example companies) just are going for their own gains (Sager, 2006), people can lie, cheat, steel et cetera to gain for their own advantage. Therefore you can’t just trust any individual or party during transactions for instance (Williamson, 1975), because parties (or individuals) are just rational and they don’t mind about principles/norms and ethics. The manipulation et cetera should be expected especially when opportunism and asymmetric information play a role (Sager, 2006). This is the reason why agreements need to be monitored, so there’s need for an organization. In general this has three advantages:

1. Individuals then become more concerned for the goals of the organization, then their own gains (Williamson, 1975).

2. It’s easier to monitor organizations, then individuals.

3. Organizations can mediate their differences easier then the market itself.

Besides it is easier to set some rules for transactions between organizations, so the opportunism is as fair as possible. If you have a lot of parties who exchange at the same time it are possible to avoid the opportunistic behavior and you could even punish it. When there are with just a few parties this is more difficult or is even not possible (Williamson, 1975). A consequence of opportunism could be that the transaction costs are counted double. It could also be that there is a lack of a technology of a commitment and extra unessential political transaction costs (Sager, 2006).

There is however a kind of ‘strong form’ of opportunism. This opportunism, as suggested by Williamson, manifest itself through ‘(1) deliberate misrepresentation of various kinds during relationship initiation (i.e., ex ante) and (2) various forms of violations over the course of the relationship (i.e., ex post)’ (Wathne & Heide, p. 36).

The notion of opportunism is controversial and when the risk in particular relationships is high, certain resources must be spent on the control and monitoring of opportunism. Even though this money could be spent better on other things. If deals don’t succeed it will create enormous opportunity costs (Wathne & Heide, 2000). Still opportunism is very unknown / unexplored nowadays and this has a few reasons, namely; (1) just a few studies have measured opportunism, (2) the conceptual definition is still unresolved. Originally opportunism was viewed as abuse of a specific contract, but nowadays this includes violation in relational contracts as well and (3) the concepts includes many different behaviors, passive and active (Wathne & Heide, 2000).

References

Sager, T. (2006). The logic of critical communicative planning: transaction cost alteration. Planning theory. Vol. 5(3): 223-254.

Wathne, K.H. & Heide, J.B. (2000). Opportunism in Interfirm Relationships: Forms, Outcomes and Solutions. Journal of marketing. Volume 64, issue 4. pp. 36-51.

Williamson, O. (1975). Markets and Hierarchies. Free Press. p. 20-30.

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Page published by Renate van Haaren, --RenateVanHaaren 20:35, 16 October 2012 (CEST)