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 the 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 to say that 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.
This page is auto-translated from /nishio/関係特殊資産 using DeepL. If you looks something interesting but the auto-translated English is not good enough to understand it, feel free to let me know at @nishio_en. I’m very happy to spread my thought to non-Japanese readers.