Related special assets
A relationship-specific asset is an asset that has value only in one particular transaction relationship. It is an asset that would lose most or all of its value in a transaction with another counterparty.
Examples include the following
- Dedicated facilities for producing products or parts customize for a specific customer
- Factories and stores located on the premise of doing business with specific clients
- Know-how and knowledge that can only be acquired through transactions with specific suppliers
- relationship of mutual trust or human network with a specific business partner
Such relationship-specific assets have value as long as the business relationship continues, but if the business relationship is terminated for some reason, the company will suffer a significant loss. In other words, investing in relationship-specific assets creates a strong dependence on the counterparty.
This leaves the party that invested in the related special asset vulnerable to Opportunistic Behavior (hold-up problem) from the counterparty. To deal with this problem, companies may use measures such as vertical integration or long-term contracts.
The concept of relational special assets plays a central role in Transaction Cost Theory. It is recognized as a source of transaction costs and is an important concept in analyzing corporate boundary determination and governance structure choices.
The deal could be interpreted as a small community between the parties.
- Then we can expand it to say that the related special assets are community assets.
- A situation in which assets for the benefit of community members are financed by the expenditures of some community members. - Issues similar to [Governance of the Commons
- It might be better if organizational boundaries and ownership were smoother.
Let the other party accumulate relationship-specific assets.
- This reduces the probability that the other party will say "I give up" and reduces uncertainty.
- I take the initiative and load it up, barter or principle of reciprocity.
- Certain raise.
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